Jim,
PK deficiency
2022 Annual Report
Fueled by
Connections
A leader in the field of cellular metabolism
pioneering therapies for rare diseases
John,
PK deficiency
Dominique,
sickle cell disease
NinaMaria,
thalassemia
Jim, living with
PK deficiency
Meet Jim
Jim is an aspiring physician’s assistant, student,
beach volleyball player and PK deficiency
advocate. He was diagnosed with PK deficiency
at birth after being rushed to the NICU with
severe jaundice. Throughout his childhood, he
faced jaundice, fatigue, regular transfusions, iron
overload and splenectomy. When he went to college, he
noticed the negative impact of his disease on his quality
of life, including his ability to balance his schoolwork, sports
activities and social life. Jim’s doctor informed him about Agios’
clinical studies in PK deficiency, and he decided to enroll.
Agios is proud to work toward improving the lives of people like Jim.
“
I decided it was in my best interest to advocate for myself to
try to feel better with my PK deficiency. I wanted to make
sure that I was doing everything in my power to help myself.
“
Jim says, reflecting on that decision. Jim continues to take the medication today.
At Agios, we are
fueled by connections.
Our ability to work together with patient communities, healthcare professionals,
partners and colleagues – and honor each of their perspectives – powers our continued
success in creating groundbreaking therapies for the patients who need them.
In 2022, our first-in-class PK activator was approved in the U.S., EU, and Great Britain
and became the first disease-modifying treatment for adults with pyruvate kinase (PK)
deficiency, a rare, debilitating, lifelong blood disorder. We are grateful for the partnership
of the patient community, healthcare providers and all who were involved in delivering this
important therapy for patients.
2022 Annual Report
Fellow Stockholders
Since our founding, Agios has been a pioneering leader in cellular
metabolism, advancing therapies for patients with unmet needs.
This focus led us to develop a novel therapeutic approach, called
pyruvate kinase (PK) activation, and today Agios is dedicated to
improving the lives of those touched by life-altering rare diseases.
2022 was a transformative year for Agios as we received our
first rare disease approval – for PYRUKYND® (mitapivat) – in
the U.S., EU, and Great Britain, a significant milestone in our
journey to improve the lives of people living with rare diseases.
But it doesn’t stop there. We are advancing a robust pipeline
of therapies for other rare diseases as we partner with and
listen to patients and healthcare providers, and as we advance
health equity for all.
Patient Allies
People living with rare diseases are at the center of everything
we do and every decision we make. Their needs, concerns,
input and collaboration are essential to fulfilling our mission.
As such, we strive to be allies for people who have historically
been overlooked, underdiagnosed and underserved.
We build true partnerships and believe that the best
outcomes are achieved when we work together to create
them. For example, Agios strives for patient voices to be
central when developing clinical trial protocols and creating
communications for trial participants. By seeking input from
patients early on, and incorporating their feedback, our trials
are better equipped to address the aspects of the disease that
are most important to patients, and are more inclusive and
accommodating of patients’ needs which paves the way for
more representative diversity in our trials.
Expanding Access
Our goal is for as many eligible patients as possible to have
access to our medicines and for out-of-pocket costs for the
individual patients to be as reasonable as possible.
PYRUKYND® was approved in the U.S. in February 2022 and
since approval, 88% of eligible U.S. patients with commercial
health insurance have utilized the PYRUKYND® Copay
Program which lowers copay costs to $0 per prescription.
Eligible U.S. patients who are uninsured, underinsured, or
rendered uninsured may get help from our Patient Assistance
Program which offers free prescriptions. We also developed
myAgios® Patient Support Services in close collaboration
with the patient, caregiver and provider communities; this
program supports patients and caregivers as they navigate
access to treatment regardless of their insurance carrier or
coverage status.
PYRUKYND® at no charge to the patient while Agios evaluates
commercialization approaches and advances clinical programs
for PYRUKYND® in more prevalent disease states.
Advancing Our Pipeline
We are focusing our PK activator molecules on classical
hematologic diseases that share a common underlying
pathophysiology, and data we generate in one disease area has
direct implications for our probability of success in other areas.
The data we’ve generated to date is striking. We have seen
compelling and consistent data across multiple disease areas,
including hemoglobin, hemolysis, ineffective erythropoiesis,
transfusion burden, iron overload, and bone health, suggesting
that PK activation may have the potential to transform patient
function, quality of life, and long-term outcomes in each
of these indications.
Our pipeline has grown dramatically since we announced the
divestiture of our oncology business and focused exclusively on
rare diseases just two years ago. This is a true testament to the
dedication and expertise of our development team. Reflecting
on our 2022 milestones, I am very proud of the team’s ability to
innovate, execute and deliver on behalf of patients including the
full enrollment in our RISE UP study for sickle cell disease, over
50% enrollment in our Phase 3 ENERGIZE and ENERGIZE-T
studies for thalassemia, and the initiation of the Phase 2a study
of our novel PK activator AG-946 in lower-risk myelodysplastic
syndrome (MDS).
This commitment and excellence of our team positions Agios
to expand our impact to many more patients and this year we
expect to:
• Complete enrollment of the Phase 3 ENERGIZE and
ENERGIZE-T studies of PYRUKYND® in thalassemia
by mid-year
• Enroll at least half of patients in the Phase 3 ACTIVATE-
kids and ACTIVATE-kidsT studies of PYRUKYND®
in Pediatric PK Deficiency by year-end
• Announce data readout from the Phase 2 portion of
RISE UP study of PYRUKUND® in sickle cell disease
and go/no-go to Phase 3 decision by mid-year
• Complete enrollment of our Phase 2a study of novel
PK activator AG-946 in lower-risk MDS by year-end
Outside of the U.S, Agios’ Global Managed Access Program
(GMAP) provides a pathway for adult PK deficiency patients
receiving care in the EU and Great Britain to have access to
• File an investigational new drug (IND) application for
PAH stabilizer for the treatment of phenylketonuria
(PKU) by year-end
The Road Ahead
When I joined Agios as CEO in August 2022, I was drawn to the
com
company because I could see it had a unique set of ingredients,
including a strong purpose focused on serving rare disease
patients, a legacy of developing transformative therapies such
as PYRUKYND®, an impressive late-stage clinical and emerging
pipeline, an enviable balance sheet and an inspiring Board,
leadership team and company culture.
ud
n
R
n
er
Ahe
Ahead of us is a catalyst-rich period; by 2026, we expect to have a
classical hematology franchise with approvals in three indications
as well as an expanded portfolio beyond PK activation.
I am deeply grateful to our team, scientific and clinical
collaborators, patients and their caregivers, advocates, founders,
board members and stockholders for your ongoing support.
Thank you for your collaboration and for sharing our vision to make
a meaningful impact for people with rare diseases.
Brian Goff, Chief Executive Officer
Pipeline
Clinical Programs
Drug
Discovery
Early Stage Clinical
Development
Late Stage Clinical
Development
Regulatory
Submission
Approved
ACTIVATE and ACTIVATE-T
APPROVED
in the U.S.,
Great Britain and EU
ENERGIZE
ENERGIZE-T
RISE UP
ACTIVATE-kidsT
ACTIVATE-kids
Planning underway
Planning underway
Phase 2
Mitapivat (PK Activator)
Adult PK Deficiency
Non-transfusion Dependent
Adult Thalassemia
Transfusion Dependent
Adult Thalassemia
Adult Sickle Cell Disease
Transfusion Dependent
Pediatric PK Deficiency
Non-transfusion Dependent
Pediatric PK Deficiency
Pediatric Thalassemia
Pediatric Sickle Cell Disease
AG-946 (PK Activator)
MDS-associated
Anemia
Healthy Volunteers/
Sickle Cell Disease
Preclinical
Phenylalanine Hydroxylase
(PAH) Stabilizer
Other PKR/PKM2
Development Candidates
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
☑
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission File Number:
001-36014
AGIOS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
88 Sidney Street,
Cambridge, MA
(Address of principal executive offices)
26-0662915
(IRS Employer
Identification No.)
02139
(Zip Code)
Registrant’s telephone number, including area code:
(617) 649-8600
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Trading symbol(s)
Name of Exchange on Which Registered
Common Stock, Par Value $0.001 per share
AGIO
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
No ☑
No ☐
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☑
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☑
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting
company ☐
Emerging growth
company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
The aggregate market value of the voting and non-voting Common Stock held by non-affiliates of the registrant computed by reference to the
price of the registrant’s Common Stock as of June 30, 2022 (based on the last reported sale price on the Nasdaq Global Select Market as of such date)
was $1,200,277,504.
No ☑
As of February 17, 2023, there were 55,285,223 shares of Common Stock, $0.001 par value per share, outstanding.
Portions of the registrant’s definitive proxy statement for its 2023 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within
120 days of the end of the registrant’s fiscal year ended December 31, 2022 are incorporated by reference into Part III of this Annual Report on Form
10-K to the extent stated herein.
DOCUMENTS INCORPORATED BY REFERENCE
Table of contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
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i
References to Agios
PART I
Throughout this Annual Report on Form 10-K, “the Company,” “we,” “us,” and “our,” and similar expressions, except where
the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our board of
directors” refers to the board of directors of Agios Pharmaceuticals, Inc.
Cautionary Note Regarding Forward-looking Information
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including statements
regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, and
objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” vision” “will,”
“would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements regarding:
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our plans to commercialize PYRUKYND® (mitapivat);
the initiation, timing, progress and results of current and future preclinical studies and clinical trials, and our
research and development programs;
the potential of the isoforms of pyruvate kinase, including PKR, as therapeutic targets;
the potential benefits of our products and product candidates targeting PKR, including PYRUKYND® (mitapivat)
and AG-946, and our PAH stabilizer program;
our plans to develop and commercialize any additional product candidates for which we may receive approval,
either alone or with partners;
our ability to establish and maintain collaborations or to obtain additional funding, if needed;
the timing or likelihood of regulatory filings and approvals;
our strategic vision;
the timing, likelihood and amount of contingent consideration we may receive from Servier Pharmaceuticals LLC,
or Servier, in connection with the sale of our oncology business to Servier that we consummated in March 2021;
the implementation of our business model and strategic plans for our business, product candidates and technology;
our commercialization, marketing and manufacturing capabilities and strategy;
the rate and degree of market acceptance and clinical utility of our products;
our competitive position;
our intellectual property position;
developments and projections relating to our competitors and our industry;
the impact of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated milestones; and
our estimates regarding our ability to achieve cash flow positivity, expenses, future revenue, capital requirements
and needs for additional financing.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should
not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in this
Annual Report on Form 10-K, particularly in the "Summary Risk Factors" and “Risk Factors” sections, that could cause actual
results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, in-licensing arrangements, mergers, dispositions, joint ventures or
investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on
Form 10-K completely and with the understanding that our actual future results may be materially different from what we
expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry
publications and research, surveys and studies conducted by third parties. All of the market data used in this Annual Report on
Form 10-K involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. We
1
believe that the information from these industry publications, research, surveys and studies is reliable. The industry in which we
operate is subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in the
sections titled “Summary Risk Factors” and “Risk Factors.”
Summary Risk Factors
Our business is subject to a number of risks that if realized could materially affect our business, financial condition, results of
operations, cash flows and access to liquidity. These risks are discussed more fully in the “Risk Factors” section of this Annual
Report on Form 10-K. Our principal risks include the following:
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If we do not successfully commercialize PYRUKYND® for the treatment of adults with PK deficiency in the approved
jurisdictions and other products for which we receive approval, our prospects may be substantially harmed. Our ability to
generate product revenue from PYRUKYND® depends heavily on our successful development and commercialization
of the product.
We depend heavily on the success of our clinical product candidates, including, upon approval, PYRUKYND® for use
in indications other than PK deficiency and in other jurisdictions. Clinical trials of our product candidates may not be
successful for a number of important reasons. If we or our collaborators are unable to commercialize our product
candidates or experience significant delays in doing so, our business will be materially harmed.
We may engage in in-licensing transactions or acquisitions that could disrupt our business, cause dilution to our
stockholders or reduce our financial resources.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on
product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
The COVID-19 pandemic has and may continue to affect our ability to initiate or continue our planned, ongoing and
future preclinical studies, clinical trials, disrupt regulatory activities, disrupt our ability to maintain a commercial
infrastructure for PYRUKYND® or have other adverse effects on our business and operations.
PYRUKYND®, or any of our product candidates that may receive marketing approval in the future, may be less
effective than previously believed or cause undesirable side effects that were not previously identified in clinical trials or
may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical
community necessary for commercial success, which could compromise our ability, or that of any collaborators, to
market the product.
If we are unable to establish and maintain sales and marketing capabilities or enter into agreements with third parties to
sell and market our products, we may not be successful in commercializing PYRUKYND® or our product candidates if
and when they are approved.
We face substantial competition, which may result in others discovering, developing or commercializing products before
or more successfully than we do. There are a number of large pharmaceutical and biotechnology companies that
currently market and sell products or are pursuing the development of products for the treatment of the disease
indications for which we are developing our product or our product candidates. Our competitors may develop products
that are more effective, safer, more convenient or less costly than PYRUKYND® or any product candidates that we are
developing or that would render PYRUKYND® or our product candidates obsolete or non-competitive.
We are singularly focused on products and product candidates for the treatment of rare diseases. As a result, we may be
more susceptible to changing market conditions, including fluctuations and risks particular to the markets for patients
with rare diseases, than a more diversified company, which could adversely affect our business, financial condition and
results of operations.
If our existing capital is insufficient to execute our operating plan through major catalysts and to cash-flow positivity, we
will need to raise capital, and if we are unable to raise capital when needed, we would be forced to delay, reduce or
eliminate our product development programs or commercialization efforts.
We have historically incurred operating losses. We expect to incur losses in the future and may never achieve or
maintain profitability. Our net loss for the year ended December 31, 2022 was $231.8 million, our net income for the
year ended December 31, 2021 was $1,604.7 million and our net loss for the year ended December 31, 2020 was $327.4
million. The net income we generated in the year ended December 31, 2021 was due to the sale of our oncology business
to Servier in March 2021. As of December 31, 2022, we had an accumulated deficit of $470.6 million.
We currently rely and expect to continue to rely on third parties for the manufacture of our product candidates for
preclinical and clinical testing and for commercial supply of PYRUKYND® and any product candidate for which we
obtain marketing approval. Any performance failure on the part of our existing or future third-party manufacturers could
delay clinical development, marketing approval or our commercialization efforts.
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•
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•
We rely and expect to continue to rely on third parties to conduct our clinical trials and some aspects of our research and
preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the
completion of such trials, research or testing.
We may depend on collaborations with third parties for the development and commercialization of our product
candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these
product candidates.
If we are unable to obtain and maintain patent or trade secret protection for our medicines and technology, or if the scope
of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize medicines
and technology similar or identical to ours, and our ability to successfully commercialize our medicines and technology
may be adversely affected. If we do not, or are unable to, obtain or maintain any issued patents for any of our most
advanced product candidates, it could have a material adverse effect on our competitive position, business, financial
condition, results of operations, and prospects.
Item 1. Business
General
We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular
metabolism, with the goal of creating differentiated, small molecule medicines for rare diseases. With a history of focused study
on cellular metabolism, we have a deep and mature understanding of this biology, which is involved in the healthy functioning
of nearly every system in the body. We accelerate the impact of our portfolio by cultivating connections with patient
communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for rare
diseases.
Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)
On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, which
represented a discontinued operation. The transaction included the sale of our oncology business, including TIBSOVO®, our
clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of
approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200.0 million in cash, if,
prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the 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. The milestone payment for approval of
vorasidenib and royalty payments related to vorasidenib and TIBSOVO® represent contingent consideration. Servier also
acquired our co-commercialization rights for Bristol Myers Squibb’s IDHIFA® and the right to receive a $25.0 million
potential milestone payment under our prior collaboration agreement with Celgene Corporation, and following the sale Servier
will conduct certain clinical development activities within the IDHIFA® development program.
We recorded income from royalties of approximately $9.9 million and $6.6 million on U.S. net sales of TIBSOVO® by Servier
in the royalty income from gain on sale of oncology business line item within the consolidated statements of operations for the
year ended December 31, 2022 and December 31, 2021, respectively.
Sale of Contingent Payments
The consideration for the sale of our oncology business to Servier includes a royalty of 5% of U.S. net sales of TIBSOVO®
from the close of the transaction through loss of exclusivity, referred to as contingent payments. We recognize the contingent
payments in the royalty income from gain on sale of oncology business line item in our consolidated statements of operations in
the period when realizable. On October 27, 2022, we sold our rights to future contingent payments to entities affiliated with
Sagard Healthcare Partners, or Sagard, and recognized income of $127.9 million within the gain on sale of contingent payments
line item in our consolidated statements of operations for the year ended December 31, 2022. We retained our rights to the
potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.
Evolution of our Research Organization
In May 2022, we announced our determination to evolve our approach to exploratory research and drug discovery to focus on
our existing late-lead optimization programs and to prioritize in-licensing or acquiring assets for pipeline growth.
We reduced approximately 45 roles focused on exploratory research in connection with this evolution of our research
organization, and plan to retain an internal research team focused on roles critical to advancing our current and future late-stage
3
research and early clinical programs. We estimate that this initiative may provide annual average cost savings of approximately
$40 million to $50 million associated with research and related expenses between 2023 and 2026.
Business Overview
Rare diseases
The lead product candidate in our portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate
kinase, or PK, enzymes for the potential treatment of hemolytic anemias. In February 2022, the FDA approved PYRUKYND®
for the treatment of hemolytic anemia in adults with PK deficiency in the United States. In November 2022, we received
marketing authorization from the European Commission for PYRUKYND® for the treatment of PK deficiency in adult patients
in the European Union, or EU. In December 2022, we received marketing authorization in Great Britain for PYRUKYND® for
the treatment of PK deficiency in adult patients under the European Commission Decision Reliance Procedure. In addition, we
are currently evaluating PYRUKYND® in clinical trials for the treatment of thalassemia, sickle cell disease, or SCD, and in
pediatric patients with PK deficiency. We are also developing AG-946, a novel PK activator, for the potential treatment of
lower-risk myelodysplastic syndrome, or LR MDS, and hemolytic anemias.
In addition to the aforementioned clinical development programs, we continue to invest in our late-stage research program
focused on advancing a phenylalanine hydroxylase, or PAH, stabilizer for the treatment of phenylketonuria, or PKU.
With nearly 15 years of focused study in cellular metabolism, we have a deep understanding of this biology, which is involved
in the healthy functioning of nearly every system in the body. Building on this expertise, these learnings can be rapidly applied
to our clinical trials with the goal of developing medicines that can have a significant impact for patients.
Our Strategy and Long-term Goals
As part of our long-term strategy, we have developed and articulated a strategic vision that delineates our expected evolution in
light of our singular focus on rare diseases. We aim to build a sustainable, value-creating company, based on our expertise in
cellular metabolism and classical hematology, that develops and delivers differentiated medicines for patients.
By 2026, our vision is to: establish a classical hematology franchise with PYRUKYND® approvals across PK deficiency,
thalassemia and SCD; expand our portfolio by advancing AG-946 and our preclinical pipeline as well as through disciplined
business development aligned with our core therapeutic focus areas and capabilities; and achieve cash-flow positivity.
Our Core Values
Our company’s values cultivate an environment that promotes collaboration, contribution, engagement and high regard for
others’ points of view. This foundation helps our people push the boundaries of our science and create transformative
medicines, which we believe will provide long-term benefits for all our stakeholders. Our connections – with each other and
with external parties – fuel the development of new therapies for the people who need them. Our core values include:
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Aim High: We set the bar high for ourselves, and we keep working to raise it. At our core, we’re guided by a deep
respect for the science and a commitment always to act with the utmost integrity.
Come Together: We grow supportive relationships with patients and caregivers. We build trusting connections with
collaborators. Together, we make a bigger impact than we ever could alone.
Embrace Differences: Because opportunities and insights come from anywhere and anyone, we honor all voices and
encourage honest dialogue. We learn equally from success and failure, bringing an open mind and a flexible approach
to everything we do.
Bring Your Whole Self: We know we make the biggest impact when each of us can contribute and lead in our own way.
Blaze New Trails: We ask the tough questions that can lead to groundbreaking scientific advances. We nurture a
creative mindset and resourceful approach that spark life-changing innovations for patients.
Cellular Metabolism
Cellular metabolism is involved in the healthy functioning of nearly every system in the body and refers to the set of life-
sustaining chemical transformations within the cells of living organisms. The conversion of nutrients into energy via enzyme-
catalyzed reactions allows organisms to grow and reproduce, maintain their structures, and respond to their environments.
Additionally, metabolites serve as key regulators of diverse aspects of cellular biology, and pharmacologic targeting of
metabolism can therefore have disease-modifying effects in a wide variety of pathologies. The chemical reactions of
metabolism are organized into metabolic pathways, in which one chemical is transformed through a series of steps into another
chemical, by a sequence of enzymes. Enzymes catalyze quick and efficient reactions, serve as key regulators of metabolic
pathways, and respond to changes in the cell’s environment or signals from other cells. We believe our deep understanding of
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cellular metabolism can be rapidly applied to our clinical trials with the goal of developing medicines that can have a significant
impact for patients.
Rare diseases
Diseases are typically considered rare if they affect fewer than 200,000 people in the United States, or fewer than five per
10,000 people in France, Germany, Italy, Spain, United Kingdom, or the EU5. Many rare diseases are likely to be under-
diagnosed given the lack of available therapies or diagnostics, the rarity of the condition, or limited understanding of how the
disease genetics relate to the disease phenotype. It has been shown that small molecule therapies able to specifically correct
genetic deficiencies and their associated organ dysfunction may have application in conditions that arise independent of patient
genetics but for which identical organ dysfunction occurs. For example, a treatment for a hereditary hemolytic anemia may find
direct application in the treatment of a secondarily acquired hemolytic anemia.
Many rare diseases carry severe or life-threatening features. In many of these disorders, the defect of single or multiple genes
leads to a deficient expression or function in one or several gene products which collectively manifest in organ dysfunction. As
these conditions are by nature congenital and frequently hereditary, they are often detected either by genetic testing or
phenotypic diagnosis in newborns or in early childhood. A typical course of many such diseases is inexorable deterioration until
death or significant irreversible life-long disability and/or suffering.
Current treatment options for these disorders are generally limited. Severe and sustained diet modification or nutrient
supplementation can be beneficial in certain rare diseases. Several of these disorders, from a group known as lysosomal storage
diseases, have been treated successfully with enzyme replacement therapy, or ERT, the therapeutic administration of a
functional version of the defective enzyme. Examples of ERTs for lysosomal storage disorders include Fabrazyme® for Fabry
disease, Myozome® for Pompe disease, Cerezyme® for Gaucher disease, and Elaprase® for Hunter syndrome. In addition,
treatment of polygenic conditions such as achondroplasia by Vosoritide® and the monogenic condition, spinal muscular
atrophy by gene therapy with Zolgensma® and Spinraza® represent novel technologic approaches to addressing rare diseases.
Most mutations driving rare diseases are intracellular and not amenable to corrective treatment with enzyme replacement
therapies. Novel technologic approaches such as gene therapy are also being tested in a minority of conditions and are
technologies with limited application based on cost, complexity and patient selection factors. Despite the promising progress
made for patients with a small group of rare diseases, the majority of patients with these diseases have few therapeutic options,
and the standard of care for many such conditions is palliative, meaning treatment of symptoms with no effect on underlying
disease mechanisms. Our goal is to develop mechanistically specific, small molecule approaches with the potential to have
disease modifying and long-term rather than palliative effects. We are taking a novel small molecule approach to correct the
defects within diseased cells with a goal of developing transformative medicines for patients.
Classical hematology
Classical hematology refers to the study and treatment of blood disorders that are not cancerous, including thrombotic and
hemorrhagic disorders, anemia, thrombocytopenia, disorders of iron metabolism and hemoglobin disorders. Many of these
diseases are debilitating, have a negative impact on patients’ quality of life and are associated with severe complications and/or
shortened life expectancy. Despite the significant need for novel therapies and improved patient care, there is a shortage of
research and trained specialists in the field of classical hematology, and patients with these disorders are often underserved and
experience health disparities and inequity. In addition, even in diseases in which some progress has been made, large subsets of
the disease may remain underserved. Our goal is to develop transformative oral treatments for patients with various classical
hematological disorders through broad clinical development programs in order to address the unmet needs of a large range of
patients.
Our Development Programs
We believe that leveraging our core capabilities in cellular metabolism combined with our singular focus on rare diseases and
our differentiated expertise in classical hematology has significantly enhanced our ability to advance new therapeutic candidates
and bring innovative medicines to patients in need. We have a proven track record of developing new therapeutic approaches
and multiple proprietary first-in-class orally available small molecules.
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The following summarizes our approved product and most advanced clinical product candidates, each of which is described in
further detail below.
PK Activator Program
PK is the enzyme involved in the second to last reaction in glycolysis — the conversion of glucose into lactic acid. This enzyme
has several tissue-specific isoforms (PKR, PKL, PKM1 and PKM2). Pyruvate kinase-R, or PKR, is the isoform of PK that is
present in red blood cells, or RBCs. Mutations in PKR cause defects in RBC glycolysis and lead to a hematological rare disease
known as PK deficiency. Glycolysis is the only pathway available for RBCs to maintain the production of adenosine
triphosphate, or ATP, which is a form of chemical energy within cells. Accordingly, we believe that activation of mutant forms
of PKR can restore glycolytic pathway activity and increase RBC health in patients with PK deficiency, and activation of wild-
type (non-mutated) PKR can increase ATP which can then meet the increased demands resulting from metabolic stress in RBCs
of patients with hemolytic anemias such as thalassemia and SCD.
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PK Deficiency
PK deficiency is a rare genetic disorder and disease understanding is still evolving. We estimate that the prevalence of PK
deficiency is between approximately 3,000 and 8,000 individuals in the United States and EU5 and we believe that the disease
is likely under-diagnosed. PK deficiency leads to a shortened life span for RBCs and is the most common form of non-
spherocytic hemolytic anemia in humans.
There is currently no known unique ethnic or geographic representation of the disease. The disease manifests by mild to severe
forms of anemia caused by the excessive premature destruction of RBCs. The chronic hemolysis can lead to long-term
complications and comorbidities, regardless of the degree of the anemia, often resulting in jaundice and lifelong conditions
associated with chronic anemia and secondary complications. The precise mechanism for the hemolysis is not well understood
but is thought to result from membrane instability secondary to the metabolic defect caused by the low level of PKR enzyme.
The hemolysis is “extra-vascular” in that the RBCs are destroyed in small capillaries or organs and do not spontaneously break
open in the circulation. PK deficiency is an autosomal recessive disease whereby all patients inherit two mutations, one from
each parent. Children with the disease produce PKR enzyme that has only a fraction of the normal level of activity (generally
<50%). Current management strategies for PK deficiency, including blood transfusion and splenectomy, are associated with
both short- and long-term risks. More than 350 different mutations have been identified to date. As a result, there are many
different possible mutant combinations and no one clear mutational profile. The mutations observed in PK deficiency patients
are classified in two main categories. A missense mutation causes a single amino acid change in the protein, generally resulting
in some functional protein in the RBCs. A non-missense mutation is any mutation other than a missense mutation, generally
resulting in little functional protein in the RBCs. It is estimated that 58 percent of patients with PK deficiency have two
missense mutations, 27 percent have one missense and one non-missense mutation, and 15 percent have two non-missense
mutations. Boston Children’s Hospital, in collaboration with us, is conducting a Natural History Study to better understand the
symptoms and complications of PK deficiency, identify patients and treatment centers, and capture other clinical data, including
genetic information. We initiated a global registry, called Peak, for up to 500 adult and pediatric patients with PK deficiency in
the first quarter of 2018 to increase understanding of the long-term disease burden of this chronic hemolytic anemia.
Thalassemia
Thalassemia is a hereditary blood disorder in which mutations in the α- or β-globin chains of hemoglobin lead to globin chain
precipitates and aggregates that disturb the RBC membrane and induce oxidative stress, leading to decreased survival of RBC
precursors, ineffective erythropoiesis, hemolysis of mature RBCs, and anemia. We estimate that the prevalence of thalassemia
is between 18,000 and 23,000 individuals in the United States and EU5. In addition to anemia, patients with thalassemia can
experience enlarged spleen, bone deformities, iron overload, fatigue, and infection. Current treatment strategies for thalassemia
include blood transfusion and bone marrow transplantation, as well as newer therapies such as Reblozyl® for the treatment of
β-thalassemia. We believe that the activation of wild-type PKR may increase ATP production and improve red cell fitness and
survival of thalassemic RBCs, by increasing the clearance globin chain aggregates through ATP-dependent proteolytic
mechanisms.
Sickle Cell Disease
SCD is an inherited blood disorder caused by mutations in hemoglobin that enable the hemoglobin to form long polymeric
chains under certain conditions such as low oxygenation, or deoxygenation. Polymerization of this irregular hemoglobin results
in RBCs taking on a sickle shape, causing them to aggregate and obstruct small blood vessels, restricting blood flow to organs
resulting in pain, cell death and organ damage. We estimate that the prevalence of SCD is between 120,000 and 135,000
individuals in the United States and EU5. RBC deoxygenation is modulated by several factors, including the levels of 2,3-
diphosphoglycerate, or 2,3-DPG, which is found to be elevated in sickle cell patient RBCs. Current treatment strategies focus
on managing and preventing acute RBC sickling, and include hydroxyurea, L-glutamine and blood transfusions, as well as
recently approved therapies such as Adakveo® and Oxbryta®. We believe that activation of wild-type PKR in patients with
SCD may reduce hemoglobin polymerization and the sickling process by at least two mechanisms. Reducing the level of 2,3-
DPG in RBCs would increase the oxygenation state of hemoglobin to reduce sickling, while increasing the levels of ATP may
improve RBC hydration status which may also inhibit the sickling process.
Lower Risk MDS
MDS is a heterogeneous group of rare hematological malignancies characterized by dysfunctional hematopoiesis (or formation
of blood cells), progressive cytopenia (or lower-than-normal number of blood cells) and an increased risk of progression to
acute myeloid leukemia. The most common type of MDS is lower risk, or LR, MDS, but many existing therapies and therapies
under development focus on high risk MDS. Among patients with LR MDS, which is less likely to progress to acute myeloid
leukemia, the primary concern is symptomatic anemia. We estimate that the prevalence of LR MDS in the United States and
EU5 is between 75,000 and 80,000 individuals. We believe that activation of wild-type PK in LR MDS patients may improve
treatment options for LR MDS often require in-office visits and
deficient PK activity in MDS erythrocytes. Current
transfusions, and erythropoiesis stimulating agents and Reblozyl® (luspatercept-aamt) are the only approved therapies to treat
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anemia in a subset of patients. Despite approved therapies in subsets of patients, LR MDS associated anemia remains a disease
with a high unmet medical need.
Phenylketonuria
Phenylketonuria, or PKU, is a rare, genetic disease caused by deficiency of the PAH enzyme. Lack of PAH activity leads to the
accumulation of phenylalanine and downstream neurocognitive deficits. Patients with PKU are therefore often advised to
consume a highly restricted diet to in order to minimize phenylalanine intake, which can further reduce patient quality of life.
We estimate that the prevalence of PKU in the United States and EU5 is between 35,000 and 40,000 individuals. To directly
address the underlying cause of PKU, we are developing a PAH stabilizer with a goal of reducing phenylalanine levels.
PYRUKYND® (mitapivat): First-in-Class PK Activator
We are developing PYRUKYND® for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and
SCD. PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PK enzymes.
In February 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the
United States. In November 2022, we received marketing authorization from the European Commission for PYRUKYND® for
the treatment of PK deficiency in adult patients in the EU. In December 2022, we received marketing authorization in Great
Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European Commission Decision
Reliance Procedure. In addition, we are currently evaluating PYRUKYND® in clinical trials for the treatment of thalassemia,
SCD, and in pediatric patients with PK deficiency. We have worldwide development and commercial rights to PYRUKYND®
and expect to fund the future development and commercialization costs related to this program. PYRUKYND® has been
granted orphan drug designation for the treatment of PK deficiency by the FDA and the European Medicines Agency, or EMA.
Additionally, PYRUKYND® has received orphan drug designation from the FDA for the treatment of thalassemia and SCD.
We have built our commercial infrastructure to support the commercial launch of PYRUKYND® in adult PK deficiency in the
United States. We are currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great
Britain through a global managed access program. Beyond the global managed access program, we continue to evaluate options
for the commercialization of PYRUKYND® outside of the United States, including through exploring potential partnership
opportunities.
We are evaluating PYRUKYND® in the following clinical trials:
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ENERGIZE, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and
safety of PYRUKYND® as a potential treatment for adults with non-transfusion-dependent α- or β-thalassemia, defined
as ≤5 RBC units during the 24-week period before randomization and no RBC transfusions ≤8 weeks before providing
informed consent or during the screening period. The primary endpoint of the trial is percentage of patients with
hemoglobin response, defined as a ≥1.0 g/dL increase in average hemoglobin concentration from Week 12 through Week
24 compared with baseline. Secondary endpoints include markers of hemolysis and ineffective erythropoiesis, as well as
patient-reported outcome measures. This trial is enrolling patients, and we expect to complete enrollment by mid-year
2023.
ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and
safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6
to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. The
primary endpoint of the trial is percentage of patients with transfusion reduction response, defined as a ≥50% reduction
in transfused RBC units with a reduction of ≥2 units of transfused RBCs in any consecutive 12-week period through
Week 48 compared with baseline. Secondary endpoints include additional transfusion reduction measures and percentage
of participants with transfusion-independence. This trial is enrolling patients, and we expect to complete enrollment by
mid-year 2023.
RISE UP, a phase 2/3 study evaluating the efficacy and safety of PYRUKYND® in SCD patients who are 16 years of
age or older, have had between two and 10 sickle cell pain crises in the past 12 months, and have hemoglobin within the
range of 5.5 to 10.5 g/dL during screening. The phase 2 portion of the trial includes a 12-week randomized, placebo-
controlled period in which participants will be randomized in a 1:1:1 ratio to receive 50 mg PYRUKYND® twice daily,
100 mg PYRUKYND® twice daily or matched placebo. The primary endpoints are hemoglobin response, defined as ≥1
g/dL increase in average hemoglobin concentration from Week 10 through Week 12 compared to baseline, and safety.
These data will be used to establish a clear dosing paradigm for the phase 3 portion. The phase 3 portion includes a 52-
week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the
recommended PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/
dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants
who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension
period to continue to receive PYRUKYND®. The phase 2 portion of this trial has been fully enrolled, and we expect to
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announce the data from the phase 2 portion of this trial and decide whether we are initiating the phase 3 portion of this
trial by mid-year 2023.
ACTIVATE-kids and ACTIVATE-kidsT, double-blind phase 3 studies evaluating the efficacy and safety of
PYRUKYND® as a potential treatment for PK deficiency in not regularly transfused and regularly transfused patients
between one and 18 years old, respectively. The primary endpoint of ACTIVATE-kids is percentage of patients with
hemoglobin response, defined as ≥1.5 g/dL increase in hemoglobin concentration from baseline that is sustained at two
or more scheduled assessments at weeks 12, 16, and 20 during the double-blind period. The primary endpoint of
ACTIVATE-kidsT is transfusion reduction response, defined as ≥33% reduction in total RBC transfusion volume from
week 9 through week 32 of the double-blind period. Both trials are enrolling patients, and we expect to enroll at least
half of the patients by year-end 2023.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients
from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and
regularly transfused adult patients with PK deficiency.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients
from DRIVE PK, our completed global phase 2, first-in-patient, open-label safety and efficacy clinical
trial of
PYRUKYND® in adult, not regularly transfused patients with PK deficiency.
An extension study evaluating the safety, tolerability and efficacy of treatment with PYRUKYND® in patients from our
completed phase 2, open-label safety and efficacy clinical trial of PYRUKYND® in adults with non-transfusion-
dependent α- and β-thalassemia.
In collaboration with the Company, the National Institutes of Health, or NIH, is evaluating PYRUKYND® in a phase 1
trial in patients with SCD pursuant to a cooperative research and development agreement. The core trial period has
completed, and the long-term extension study is ongoing. In June 2020, clinical proof of concept was established based
on a preliminary analysis of the data from this trial.
In collaboration with the Company, UMC Utrecht, or UMC, is evaluating PYRUKYND® in patients with SCD pursuant
to an investigator sponsored trial agreement. The trial has completed enrollment and patient follow-up is ongoing, and a
2-year extension study has been activated for patients who complete the follow-up period.
AG-946 and Other Programs
We are developing AG-946, a novel PK activator, for the potential treatment of LR MDS and hemolytic anemias. We are
evaluating AG-946, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. We have presented data from
the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial. We are evaluating AG-946 in a phase 2a
study in adults with LR MDS, and we expect to complete enrollment by year-end 2023.
In addition to the aforementioned development programs, we are advancing our late-stage research program focused on a PAH
stabilizer for the treatment of PKU, for which we expect to file an investigational new drug application by year-end 2023.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for
our product candidates and our core technologies, including novel biomarker and diagnostic discoveries, and other know-how,
to operate without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary or
intellectual property rights. Our policy is to seek to protect our proprietary and intellectual property position by, among other
methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are
important to the development and implementation of our business. We also rely on confidential information, know-how and
continuing technological innovation to develop and maintain our proprietary and intellectual property position. We may also
choose to rely on trade secrets to protect certain aspects of our business that are not suitable or appropriate for patent protection.
We file, or may collaborate with third parties to file, patent applications directed to our key products and product candidates,
including PYRUKYND® and AG-946, in addition to related compounds and potential back-up compounds, in an effort to
establish intellectual property positions to protect these new chemical entities as well as methods of using these compounds in
the treatment of diseases, formulations, solid state forms, and manufacturing processes. We may also seek patent protection for
certain biomarkers that may be useful in identifying the appropriate patient population for therapies with our product
candidates.
PK activator program
The patent portfolio for our PK activator program contains issued patents and pending patent applications directed to
compositions of matter for PYRUKYND®, as well as to related compounds, various solid state forms of PYRUKYND®,
compositions of matter for additional PKR activators, such as AG-946, as well as methods of use for these novel compounds.
As of February 1, 2023, we owned 11 issued U.S. patents and 190 issued foreign patents, and have pending patent applications
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in the US and in various foreign jurisdictions. The patents that have issued or will issue for our PK activator program will have
a statutory expiration date of at least 2030 to 2042. Patent term adjustments or patent term extensions could result in later
expiration dates. In some cases, the term of a US patent can be shortened by the filing of a terminal disclaimer which operates
to reduce the term of a patent to that of an earlier expiring patent. The foreign issued patents and pending patent applications are
in a number of jurisdictions, including Argentina, Australia, Austria, Belgium, Brazil, Canada, China, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Lebanon, Lithuania, Mexico, the Netherlands,
Norway, Poland, Portugal, Romania, Russia, Saudi Arabia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Turkey,
and the United Kingdom. Prosecution is a lengthy process, during which the scope of the claims initially submitted for
examination by the U.S. Patent and Trademark Office, or USPTO, can be significantly narrowed by the time they issue, if they
issue at all. We expect this could be the case with respect to some of our pending patent applications referred to above.
Patent Term
The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most
countries, including the United States, the patent term is 20 years from the earliest filing date of a non-provisional patent
application, although term extensions may be available. In the United States, a patent’s term may be lengthened by patent term
adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may
be shortened if a patent is terminally disclaimed over an earlier filed patent. The term of a patent that covers a drug or biological
product may also be eligible for patent term extension when FDA approval is granted, provided statutory and regulatory
requirements are met. The extension of the term of foreign patents varies, in accordance with local law. Although certain of the
patents granted by the regulatory authorities of the EU may expire at specific dates, the terms of patents granted in certain
European countries may extend beyond such EU patent expiration date if we were to obtain a supplementary protection
certificate. In addition, because of the extensive time required for clinical development and regulatory review of a product
candidate we may develop, it is possible that, before any of our product candidates can be commercialized, any related patent
may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such
patent.
In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to
apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for
each medicine and other factors. There can be no assurance that any of our pending patent applications will issue or that we will
benefit from any patent term extension or favorable adjustment to the term of any of our patents.
Additional Considerations
As with other biotechnology and pharmaceutical companies, our ability to maintain and solidify our proprietary and intellectual
property position for our product, product candidates and technologies will depend on our success in obtaining effective patent
claims and enforcing those claims if granted. However, patent applications that we may file or license from third parties may
not result in the issuance of patents. We also cannot predict the breadth of claims that may be allowed or enforced in our
patents. Any issued patents that we may receive in the future may be challenged, invalidated or circumvented. For example, a
third party can challenge the patentability of one or more of the claims of an issued patent in a post-grant proceeding before the
USPTO or a foreign patent office such as the European Patent Office, which can result in the loss of certain claims or the loss
of an entire patent. In addition, it is possible that a third party has filed a patent application in the United States, or abroad, that
claims the same technology or chemical structures that are claimed in our own patent applications or patents. In such cases, we
may have to participate in legal proceedings or enter into a licensing arrangement, which could result in substantial costs to us,
even if the eventual outcome is favorable to us. In addition to patent protection, we also rely upon unpatented confidential
information, including confidential technical information, know-how and continuing technological innovation to develop and
maintain our competitive position. We seek to protect our proprietary information, in part, by using confidentiality agreements
third-party service providers, scientific advisors, employees and consultants, and by invention
with our collaborators,
assignment agreements with our employees. We also have agreements requiring assignment of inventions with selected
consultants, scientific advisors and collaborators. The confidentiality agreements are designed to protect our proprietary
information and, in the case of agreements or clauses requiring invention assignment, to grant us ownership of technologies that
are developed through a relationship with a third party.
With respect to our proprietary cellular metabolism technology platform, we consider confidential information and know-how
related to our cellular metabolism technology platform to be our primary intellectual property in this space. Confidential
information and know-how can be difficult to protect. In particular, we anticipate that with respect to this technology platform,
at least some of the technical information and know-how will, over time, become known within the industry through
independent development, the publication of journal articles describing the methodology, and the movement of personnel
skilled in the art from academic to industry scientific positions.
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Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and
a strong emphasis on proprietary products. While we believe that our technology, development experience and scientific
knowledge provide us with competitive advantages, we face potential competition from many different sources, including
major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental
agencies, and public and private research institutions. PYRUKYND® and any product candidates that we successfully develop
and commercialize will compete with existing therapies and new therapies that may become available in the future.
We compete in the areas of pharmaceutical, biotechnology and other related markets that address rare diseases, particularly
hemolytic anemias and PKU. There are other companies working to develop therapies in the field of rare diseases, including
divisions of large pharmaceutical companies and biotechnology companies of various sizes.
Our competitors include: Bristol-Myers Squibb Company, or BMS; BioMarin Pharmaceutical, Inc., or BioMarin; bluebird bio,
Inc., or bluebird; Merck & Co., Inc., or Merck; Novartis International AG, or Novartis; Novo Nordisk A/S, or Novo; Pfizer,
Inc., or Pfizer;; Rocket Pharma LTD, or Rocket Pharma; Vertex Pharmaceuticals Incorporated, or Vertex, Emmaus Life
Sciences, or Emmaus, Fibrogen, Inc., or Fibrogen, Fulcrum Therapeutics, Inc., or Fulcrum, and Geron Corporation, or Geron.
The most common methods for treating patients with rare diseases include dietary restriction, dietary supplementation or
replacement, treatment of symptoms and complications, gene therapy, blood transfusions, stem cell transplant and enzyme
replacement therapies. There are a number of marketed therapies available for treating patients with hemolytic anemias and
PKU. For example, recently approved treatments for thalassemia, SCD, LR MDS and PKU include Reblozyl® from Merck/
BMS (formerly Acceleron/BMS); Revlimid® from BMS; Lentiglobin® from bluebird; Adakveo® from Novartis; Oxbryta®
from Pfizer; Kuvan® and Palynziq® from BioMarin and Endari® from Emmaus. While our product and product candidates
may compete with existing medicines and other therapies, to the extent they are ultimately used in combination with or as an
adjunct to these therapies, our product or product candidates may not be competitive with them. In addition to currently
marketed therapies, there are also a number of products that are either small molecules, biologics, enzyme replacement
therapies or gene therapies in various stages of clinical development to treat hemolytic anemias and PKU. For example, Rocket
Pharma is conducting a clinical trial of a gene therapy targeting PK deficiency, Novo is developing etavopivat (a PKR
activator) for the treatment of hemolytic anemias, including thalassemia, SCD and MDS, Pfizer is developing inclacumab and
GBT-601 for the treatment of SCD, Fibrogen is developing roxadustat for the treatment of anemia in MDS patients, Geron is
developing imetelstat for the treatment of LR MDS, Vertex is developing a gene therapy targeting SCD, and Fulcrum is
developing FTX-6058 in SCD, and a number of companies, including PTC Therapeutics, Inc., or PTC, Synlogic, Inc., or
Synlogic, and Jnana Therapeutics, Inc., or Jnana, are developing therapies to treat PKU. These products in development may
provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they
may provide competition for any of our product or product candidates for which we obtain market approval.
Many of our competitors may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and globally marketing approved
medicines than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in
even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us
in recruiting and retaining qualified scientific and management personnel, and establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring or in-licensing technologies complementary to, or necessary for, our
programs. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies.
The key competitive factors affecting the success of PYRUKYND® and any of our product candidates that we develop, if
approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the
use of related therapeutics where appropriate, the level of generic competition and the availability of reimbursement from
government and other third-party payors.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that are
safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any medicines that
we may develop. Our competitors also may obtain FDA or other regulatory approval for their medicines more rapidly than we
may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to
enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors
seeking to encourage the use of generic or other branded medicines. There are many generic medicines currently on the market
for the indications that we are pursuing, and additional medicines are expected to become available on a generic basis over the
coming years. We expect that PYRUKYND® and any of our product candidates that may receive marketing approval in the
future will be priced at a significant premium over competitive generic medicines.
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Manufacturing and Supply Chain
PYRUKYND®, AG-946, and PAH are organic compounds of low molecular weight, generally called small molecules. They
can be manufactured in reliable and reproducible synthetic processes from readily available starting materials. The chemistry is
amenable to scale-up and does not require unusual equipment in the manufacturing process. We expect to continue to develop
drug candidates that can be produced cost-effectively at contract manufacturing facilities.
We do not own or operate, and currently have no plans to establish, any manufacturing or supply chain related facilities. We
currently, and expect to continue to, rely on third parties for the manufacture and supply of our clinical and preclinical product
candidates, as well as for commercial manufacture of PYRUKYND® and any product for which we may receive marketing
approval in the future. We conduct extensive prequalification programs to ensure the compliance, quality and reliability of
third-party manufacturing and supply operations.
To date, we have obtained materials for PYRUKYND® and AG-946 for our ongoing and planned clinical testing from third-
party manufacturers. We have long-term commercial manufacture and supply agreements in place for PYRUKYND®, and we
obtain our supplies from these manufacturers on a purchase order basis.
Due to the volatility of the supply networks globally, we have gained regulatory approval for redundant supply of raw materials
and active pharmaceutical ingredient, or API, for PYRUKYND®, and have an ongoing program to ensure this risk mitigation
remains effective, including establishing safety stocks. We do not currently have arrangements in place for redundant supply for
drug product, but maintain a broad safety stock program. As we have done for PYRUKYND®, we intend to identify and
qualify additional manufacturing and supply related services for our other product candidates prior to submission of an NDA to
the FDA.
Government Regulation and Product Approvals
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions,
including the EU, extensively regulate, among other things, the research, development, testing, manufacture, pricing, quality
control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval
monitoring and reporting, and import and export of biopharmaceutical products. The processes for obtaining marketing
approvals in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and
regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Approval and Regulation of Drugs in the United States
In the United States, drug products are regulated under the Federal Food, Drug and Cosmetic Act, or FDCA, and applicable
implementing regulations and guidance. A company, institution, or organization which takes responsibility for the initiation and
management of a clinical development program for such products, and for their regulatory approval, is typically referred to as a
sponsor.
A sponsor seeking approval to market and distribute a new drug in the United States generally must satisfactorily complete each
of the following steps before the product candidate will be approved by the FDA:
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preclinical testing including laboratory tests, animal studies and formulation studies which must be performed in
accordance with the FDA’s good laboratory practice, or GLP, regulations and standards;
design of a clinical protocol and submission to the FDA of an IND for human clinical testing, which must become
effective before human clinical trials may begin;
approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial
may be initiated;
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product
candidate for each proposed indication, in accordance with current good clinical practices, or GCP;
preparation and submission to the FDA of a NDA for a drug product which includes not only the results of the clinical
trials, but also, detailed information on the chemistry, manufacture and quality controls for the product candidate and
proposed labeling for one or more proposed indication(s);
review of the product candidate by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of FDA inspection of the manufacturing facility or facilities, including those of third parties, at
which the product candidate or components thereof are manufactured to assess compliance with current good
manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to
preserve the product’s identity, strength, quality and purity;
satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP and
the integrity of clinical data in support of the NDA;
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payment of user fees and securing FDA approval of the NDA to allow marketing of the new drug product; and
compliance with any post-approval requirements, including the potential requirement to implement risk evaluation and
mitigation strategies, or REMS, and the potential requirement to conduct any post-approval studies required by the FDA.
Preclinical Studies
Before a sponsor begins testing a product candidate with potential therapeutic value in humans, the product candidate enters the
preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well
as other studies to evaluate, among other things, the toxicity of the product candidate. The conduct of the preclinical tests and
formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations
and standards, and the United States Department of Agriculture’s Animal Welfare Act, if applicable. The results of the
preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND and
are typically referred to as IND-enabling studies. Some long-term preclinical testing, such as animal tests of reproductive
adverse events and carcinogenicity, and long-term toxicity studies, may continue after the IND is submitted.
The IND and IRB Processes
An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for
use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans.
Such authorization must be secured prior to interstate shipment and administration of any product candidate that is not the
subject of an approved NDA. In support of a request for an IND, sponsors must submit a protocol for each clinical trial and any
subsequent protocol amendments must be submitted to the FDA as part of the IND. The FDA requires a 30-day waiting period
after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the
IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day
period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose
a clinical or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before
clinical trials can begin.
Following commencement of a clinical trial under an IND, the FDA may also place a clinical or partial clinical hold on that
trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an
ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND.
For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than
30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the
basis for the hold. Following issuance of a clinical or partial clinical hold, an investigation may only resume after the FDA has
notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the
sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is
conducted under an IND, all FDA IND requirements must be met unless waived. When a foreign clinical study is not conducted
including GCP
under an IND, the sponsor must ensure that the study complies with certain regulatory requirements,
requirements, of the FDA in order to use the study as support for an IND or application for marketing approval. The GCP
requirements encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to
help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of
the resulting data. They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required
for IND studies.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must
review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing
review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and
informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An
IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected
serious harm to patients.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a
data safety monitoring board or committee. This group provides authorization as to whether or not a trial may move forward at
designated check points based on access that only the group maintains to available data from the study. Suspension or
termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are
being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made based on evolving
business objectives and/or competitive climate.
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Reporting Clinical Trial Results
Under the Public Health Service Act, sponsors of certain clinical
including
prescription drugs and biologics, are required to register and disclose certain clinical trial information on a public registry
(clinicaltrials.gov) maintained by the NIH. Information related to the product, patient population, phase of investigation, study
sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. With
the issuance of several notices of non-compliance since April 2021, the FDA and NIH have recently signaled the government’s
willingness to begin enforcing these requirements against non-compliant clinical trial sponsors. The failure to submit clinical
trial information to clinicaltrials.gov is also a prohibited act under the FDCA with violations subject to potential civil monetary
penalties of up to $10,000 for each day the violation continues. Violations may also result in injunctions and/or criminal
prosecution or disqualification from federal grants.
trials of certain FDA-regulated products,
Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical
trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or
satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access
to investigational drugs for patients who may benefit from investigational therapies. FDA regulations allow access to
investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for:
individual patients (single-patient IND applications for treatment
in emergency settings and non-emergency settings);
intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND
Application.
While there is no obligation to make investigational products available for expanded access, sponsors are required to make
policies for evaluating and responding to requests for expanded access publicly available upon the earlier of initiation of a
Phase 2 or Phase 3 clinical trial, or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track
product, or regenerative medicine advanced therapy.
In addition, the Right to Try Act, among other things, provides a federal framework for certain patients to access certain
investigational new drug products that have completed a Phase 1 clinical trial and are undergoing investigation for FDA
approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without
obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its
drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal
policy and respond to patient requests according to that policy.
Human Clinical Trials in Support of an NDA
Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a
qualified investigator in accordance with GCP requirements which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are
conducted under written clinical trial protocols detailing, among other things, the objectives of the study, inclusion and
exclusion criteria, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.
Human clinical trials are typically conducted in three sequential phases, but the phases may overlap or be combined.
Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse
effects, dose tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics in healthy humans or in patients.
During Phase 1 clinical trials, information about the investigational drug product’s pharmacokinetics and pharmacological
effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
Phase 2 clinical trials are generally conducted to identify possible adverse effects and safety risks, evaluate the efficacy of the
product candidate for specific targeted indications, and determine dose tolerance and optimal dosage. Multiple Phase 2 clinical
trials may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials.
Phase 2 clinical trials are well controlled, closely monitored and conducted in a limited patient population.
Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially
effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken within an expanded patient population to
further evaluate dosage, provide substantial evidence of clinical efficacy, and further test for safety in an expanded and diverse
patient population at multiple, geographically dispersed clinical trial sites. The FDA may require more than one Phase 3 clinical
trial to support approval of a product candidate. A well-controlled, statistically robust Phase 3 clinical trial may be designed to
deliver the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to appropriately
label a drug; such Phase 3 clinical trials are referred to as “pivotal.” A Phase 2 clinical trial can be a “pivotal” trial if the design
provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need.
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A company’s designation of the phase of a trial is not necessarily indicative that the trial will be sufficient to satisfy the FDA
requirements of that phase.
In some cases, the FDA may approve an NDA for a product candidate but require the sponsor to conduct additional clinical
trials to further assess the product candidate’s safety and effectiveness after approval. Such post-approval trials are typically
referred to as Phase 4 clinical trials. These trials are used to gain additional experience from the treatment of a larger number of
patients in the intended treatment group and to further document a clinical benefit in the case of drugs approved under
accelerated approval regulations. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in
withdrawal of approval for products.
Progress reports detailing the results of clinical trials must be submitted at least annually to the FDA and more frequently if
serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious
and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant
risk in humans exposed to the product; and any clinically important increase in the case of a serious suspected adverse reaction
over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed
successfully within any specified period, or at all. The FDA will typically inspect one or more clinical sites to assure
compliance with GCP and the integrity of the clinical data submitted.
Review and Approval of an NDA
In order to obtain approval to market a drug product in the United States, a marketing application must be submitted to the FDA
that provides sufficient data establishing the safety and efficacy of the proposed drug product for its intended indication. The
application must include all relevant data available from pertinent preclinical and clinical trials, including negative or
ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials
intended to test the safety and effectiveness of a product use, or from a number of alternative sources, including studies initiated
by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the
safety and efficacy of the drug product to the satisfaction of the FDA.
The NDA is a vehicle through which sponsors formally propose that the FDA approve a new product for marketing and sale in
the United States for one or more indications. Every new drug product candidate must be the subject of an approved NDA
before it may be commercialized in the United States. Under federal law, the submission of most NDAs is subject to an
application user fee, which for federal fiscal year 2023 is approximately $3.25 million. The sponsor of an approved NDA is also
subject to an annual program fee, which for fiscal year 2023 is approximately $394,000 per product. Certain exceptions and
waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation
and a waiver for certain small businesses.
Following submission of an NDA, the FDA conducts a preliminary review of the application generally within 60 calendar days
of its receipt and must inform the sponsor at that time or before whether the application is sufficiently complete to permit
substantive review. The FDA may request additional information rather than accept the application for filing. In this event, the
application must be resubmitted with the additional information. The resubmitted application is also subject to review before
the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under
the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, applications seeking
approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months from the date on which the FDA
accepts the application for filing. The review process and the PDUFA goal date may be extended by the FDA for three
additional months to consider new information or clarification provided by the sponsor to address an outstanding deficiency
identified by the FDA following the original submission.
inspections may cover all facilities associated with an NDA submission,
Before approving an application, the FDA typically will inspect the facility or facilities where the product is or will be
manufactured. These pre-approval
including
component manufacturing, finished product manufacturing and control testing laboratories. The FDA will not approve an
application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and
adequate to assure consistent production of the product within required specifications. Under the FDA Reauthorization Act of
2017, the FDA must implement a protocol to expedite review of responses to inspection reports pertaining to certain
applications, including applications for products in shortage or those for which approval is dependent on remediation of
conditions identified in the inspection report.
In addition, as a condition of approval, the FDA may require a sponsor to develop a REMS. REMS use risk minimization
strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. REMS could
include medication guides, communication plans for health care professionals, and elements to assure safe use, including
special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring
and the use of patent registries. To determine whether a REMS is needed, the FDA will consider the size of the population
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likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness
of known or potential adverse events and whether the product is an NME.
The FDA may refer an application for a novel product which presents difficult questions of safety or efficacy to an advisory
committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts,
including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory
committee, but it considers such recommendations when making decisions.
Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need
in the treatment of a serious or life-threatening disease or condition. These programs are referred to as Fast Track designation,
Breakthrough Therapy designation, priority review designation and regenerative advanced therapy designation.
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Fast Track Designation. The FDA may designate a product for Fast Track review if it is intended, whether alone or in
combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it
demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products,
sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track
product’s application before the application is complete. This rolling review process may be available if the FDA
determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be
effective. However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last
section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA
believes that the designation is no longer supported by data emerging in the clinical trial process.
Breakthrough Therapy Designation. A product may be designated as a Breakthrough Therapy if it is intended, either
alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and
preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies
on one or more clinically significant endpoints. The FDA may take certain actions with respect to Breakthrough
Therapies, including: holding meetings with the sponsor throughout the development process; providing timely advice to
the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a
cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient
manner.
Priority Review. The FDA may designate a product for priority review if it is a product that treats a serious condition
and, if approved, would provide a significant improvement in safety or effectiveness when compared with other available
therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a
condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of
patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new
subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such
applications, and to shorten the FDA’s goal for review of a marketing application from ten months to six months.
Regenerative Advanced Therapy Designation. A product is eligible for regenerative advanced therapies designation if it
is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or
condition, and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs
for such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with
FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority
review and accelerated approval based on surrogate or intermediate endpoints.
Accelerated Approval Pathway
Drug or biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that
provide meaningful therapeutic benefit over existing treatments may receive accelerated approval. Accelerated approval means
that a product candidate may be approved on the basis of adequate and well controlled clinical trials establishing that the
product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of
an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into
account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments. As a condition
of approval, the FDA may require that a sponsor of a drug or biologic product candidate receiving accelerated approval perform
adequate and well controlled post-marketing clinical trials. In addition, the FDA currently requires as a condition for
accelerated approval pre-approval of promotional materials.
The FDA’s Decision on an NDA
Based on its evaluation of the application and accompanying information, including the results of the inspection of the
manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes
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commercial marketing of the product with specific prescribing information for the approved indications. A complete response
letter generally indicates that the review cycle is complete and outlines the deficiencies in the submission and may require
substantial additional testing or information in order for the FDA to reconsider the application. A sponsor has one year to
respond to the deficiencies identified in the complete response letter. The FDA has committed to reviewing such resubmissions
in two or six months depending on the type of information included. Even with submission of this additional information, the
FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a new product, it may limit the approved indications for use of the product. The FDA may also require
contraindications, warnings or precautions be included in the product labeling, require post-approval trials, require testing and
surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and
use restrictions or other risk management mechanisms, including REMS,to help ensure that the benefits of the product outweigh
the potential risks. The FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or
surveillance programs. After approval, many types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and
approval.
Under the Ensuring Innovation Act, signed into law in 2021, the FDA must publish action packages summarizing its decisions
to approve new drugs within 30 days of approval of such drugs.
Post-Approval Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be
required to comply with all regular post-approval regulatory requirements as well as any post-approval requirements that the
FDA may have imposed as part of the approval process. The sponsor will be required to report, among other things, certain
adverse reactions and manufacturing problems to the FDA, provide updated safety and efficacy information and comply with
requirements concerning advertising and promotional labeling requirements. Manufacturers and certain of their subcontractors
are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP
regulations. Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money and effort in the
areas of production and quality control to maintain compliance with cGMP and other regulatory requirements.
A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each
lot of the product before it is released for distribution. If the product is subject to official release, the manufacturer must submit
samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot and the results
of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests
on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory research related to
the safety, purity, potency and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, with manufacturing processes, or failure to comply with
regulatory requirements, may result in: revisions to the approved labeling to add new safety information; imposition of post-
market studies or clinical trials to assess safety risks; or imposition of distribution or other restrictions under a REMS program.
Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or
product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation
of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the
market. This regulation includes, among other
things, standards and regulations for direct-to-consumer advertising,
communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities
involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited before the drug
is approved. After approval, a drug product generally may not be promoted for uses that are not approved by the FDA, as
reflected in the product’s prescribing information, although it may be permissible, under very specific, narrow conditions, for a
manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing
scientific or medical journal information. In the United States, health care professionals are generally permitted to prescribe
drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the
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practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting
the promotion of off-label uses. In September 2021, the FDA published final regulations that describe the types of evidence that
the agency will consider in determining the intended use of a drug or biologic.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and
judicial enforcement by the FDA, the DOJ, or the Office of the Inspector General of the Department of Health and Human
Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant
commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company
promotes or distributes drug products. The federal government has levied large civil and criminal fines against companies for
alleged improper promotion, and has also requested that companies enter into consent decrees or permanent injunctions under
which specified promotional conduct is changed or curtailed.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or
PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulate the
distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of drug
distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription
pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify
and remove counterfeit and other illegitimate products from the market.
Section 505(b)(2) NDAs
NDAs for most new drug products are based on two full clinical trials which must contain substantial evidence of the safety and
efficacy of the proposed new product for the proposed use. These applications are submitted under Section 505(b)(1) of the
FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This
type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy for a similar
product, or published literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to
show whether or not the drug is safe for use and effective in use and relied upon by the sponsor for approval of the application
“were not conducted by or for the sponsor and for which the sponsor has not obtained a right of reference or use from the
person by or for whom the investigations were conducted.”
Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the
sponsor. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA
approval for new or improved formulations or new uses of previously approved products. If the 505(b)(2) sponsor can establish
that reliance on the FDA’s previous approval is scientifically appropriate, the sponsor may eliminate the need to conduct certain
preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or
measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all or
some of the label indications for which the referenced product has been approved, as well as for any new indication sought by
the Section 505(b)(2) sponsor.
Generic Drugs and Regulatory Exclusivity
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress established an abbreviated regulatory
scheme authorizing the FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be
bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. Such previously approved drugs are known as the
reference listed drugs, or RLDs. Abbreviated new drug applications, or ANDAs, for generic drugs generally do not include
preclinical and clinical data to demonstrate safety and effectiveness. Instead, the sponsor may rely on the preclinical and clinical
testing previously conducted for the RLD.
Under the Hatch-Waxman Act, the FDA may not approve an ANDA or 505(b)(2) application until any applicable period of
non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a
new drug containing a new chemical entity, or NCE. For the purposes of this provision an NCE is a drug that contains no active
moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible
for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, a
generic or follow-on drug application may not be filed with the FDA until the expiration of five years unless the submission is
accompanied by a Paragraph IV certification, in which case the sponsor may submit its application four years following the
original product approval.
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical
investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the sponsor and are essential
to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug
product, such as new indications, dosage forms, route of administration, combination of ingredients. Three-year exclusivity
would be available for a drug product that contains a previously approved active moiety, provided the statutory requirement for
a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the
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FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for generic versions of the drug as of the date of approval of
the original drug product; rather, this three-year exclusivity covers only the conditions of use associated with the new clinical
investigations and, as a general matter, does not prohibit the FDA from approving follow-on applications for drugs containing
the original active ingredient.
Upon submission of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims
that cover the sponsor’s product or an approved method of using the product. Upon approval of a new drug, each of the patents
listed by the NDA sponsor is published in the FDA's publication "Approved Drug Products with Therapeutic Equivalence
Evaluations," also referred to as the Orange Book. When an ANDA sponsor files its application with the FDA, the applicant is
required to certify to the FDA concerning any patents listed for the reference product in the Orange Book. Specifically, the
sponsor must certify: (i) the required patent information has not been filed, (ii) the listed patent has expired, (iii) the listed
patent has not expired, but will expire on a particular date and approval is sought after patent expiration or (iv) the listed patent
is invalid, unenforceable or will not be infringed by the new product. To the extent that the Section 505(b)(2) sponsor is relying
on studies conducted for an already approved product, the sponsor is required to certify to the FDA concerning any patents
listed for the approved product in the Orange Book to the same extent that an ANDA sponsor would.
A certification that the new product will not infringe the already approved product’s listed patents or that such patents are
invalid or unenforceable is called a Paragraph IV certification. If the sponsor does not challenge the listed patents, the ANDA or
505(b)(2) NDA will not be approved until all the listed patents claiming the referenced product have expired.
If the ANDA sponsor or the 505(b)(2) sponsor has provided a Paragraph IV certification to the FDA, the sponsor must also
send notice of the Paragraph IV certification to the NDA owner and patent holders once the ANDA or 505(b)(2) NDA has been
accepted for filing by the FDA. The NDA owner and patent holders may then initiate a patent infringement lawsuit in response
to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a
Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30
months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is
favorable to the ANDA or 505(b)(2) sponsor.
Pediatric Studies
Under the Pediatric Research Equity Act of 2003, or PREA, an NDA or supplement thereto must contain data that are adequate
to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to
support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must
also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric
study or studies the sponsor plans to conduct, including study objectives and design, any deferral or waiver requests and other
information required by regulation. The sponsor, the FDA, and the FDA’s internal review committee must then review the
information submitted, consult with each other and agree upon a final plan. The FDA or the sponsor may request an amendment
to the plan at any time.
For drugs intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of a sponsor, meet
to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, the
FDA will meet early in the development process to discuss pediatric study plans with sponsors, and the FDA must meet with
sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later than ninety (90)
days after the FDA’s receipt of the study plan.
The FDA may, on its own initiative or at the request of the sponsor, grant deferrals for submission of some or all pediatric data
until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. A deferral
may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in
adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the
pediatric trials begin. The law now requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to
submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have
failed to request approval for a required pediatric formulation. Unless otherwise required by regulation, the pediatric data
requirements do not apply to products with orphan designation, although FDA has recently taken steps to limit what it considers
abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug
designations for rare pediatric subpopulations of what is otherwise a common disease. The FDA maintains a list of diseases that
are exempt from the requirements of the PREA.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the
attachment of an additional six months to the term of any existing patent or regulatory exclusivity for drug products. This six-
month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the
FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the
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clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested
pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory
periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but
it effectively extends the regulatory period during which the FDA cannot approve another application. With regard to patents,
the six-month pediatric exclusivity period will not attach to any patents for which a generic (ANDA or 505(b)(2) NDA) sponsor
submitted a Paragraph IV certification, unless the NDA sponsor or patent owner first obtains a court determination that the
patent is valid and infringed by a proposed generic product.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease
or condition, generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which
there is no reasonable expectation that the cost of developing and making a product available in the United States for treatment
of the disease or condition will be recovered from sales of the product. A company must seek orphan drug designation before
submitting an NDA for the candidate product. If the request is granted, the FDA will disclose the identity of the therapeutic
agent and its potential use. Orphan drug designation does not shorten the PDUFA goal dates for the regulatory review and
approval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application
fee.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such
designation, or for a select indication or use within the rare disease or condition for which it was designated, the product
generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve another sponsor’s
marketing application for the same drug for the same condition for seven years, except in certain limited circumstances. Orphan
exclusivity does not block the approval of a different product for the same rare disease or condition, nor does it block the
approval of the same product for different conditions. If a drug designated as an orphan drug ultimately receives marketing
approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.
Orphan drug exclusivity will also not bar approval of another product under certain circumstances, including if a subsequent
product with the same drug for the same condition is shown to be clinically superior to the approved product on the basis of
greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is
not able to meet market demand. This is the case despite an earlier court opinion holding that the Orphan Drug Act
unambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.
In September 2021, the Court of Appeals for the 11th Circuit held that, for the purpose of determining the scope of market
exclusivity, the term “same disease or condition” in the statute means the designated “rare disease or condition” and could not
be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded that orphan drug exclusivity applies to the
entire designated disease or condition rather than the “indication or use.” It is unclear how this court decision will be addressed
by the FDA and Congress.
Patent Term Restoration and Extension
A patent claiming a new drug product, its method of use or its method of manufacture may be eligible for a limited patent term
extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during
product development and the FDA regulatory review. The restoration period granted on a patent covering a product is typically
one-half the time between the effective date of when a clinical investigation involving human beings has begun and the
submission date of an application for approval, plus the time between the submission date of an application and the ultimate
approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the
product’s approval date. Only one patent applicable to an approved product is eligible for the extension, and the application for
the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for
which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the
application for any patent term extension or restoration in consultation with the FDA.
Health Care Law and Regulation
Health care providers and third-party payors play a primary role in the recommendation and prescription of drug products that
are granted marketing approval. Arrangements with providers, consultants, third-party payors and customers are subject to
broadly applicable fraud and abuse, anti-kickback, false claims laws, patient privacy laws and regulations and other health care
laws and regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state
health care laws and regulations, include the following:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and
willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or
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service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and
Medicaid;
the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws,
which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the
federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to
made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal
government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal
criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to
defraud any health care benefit program or making false statements relating to health care matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective
implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations,
including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of
individually identifiable health information;
the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false statement in connection with the delivery of or payment for health care
benefits, items or services;
the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or
offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business
or otherwise seeking favorable treatment;
the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient
Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the ACA, which
requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for
Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, or HHS,
information related to payments and other transfers of value made by that entity to physicians, other healthcare providers
and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family
members; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to
health care items or services that are reimbursed by non-government third-party payors, including private insurers.
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Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers
to report information related to payments to physicians and other health care providers or marketing expenditures. Additionally,
some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction. State and foreign
laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in
significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, exclusion from
participation in federal and state health care programs, such as Medicare and Medicaid.
Pharmaceutical Insurance Coverage and Health Care Reform
In the United States and other countries, patients who are prescribed treatments for their conditions and providers performing
the prescribed services generally rely on third-party payors to reimburse all or part of the associated health care costs.
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other
government authorities. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to
which third-party payors, including government health programs in the United States such as Medicare and Medicaid,
commercial health insurers and managed care organizations, provide coverage and establish adequate reimbursement levels for
the product. The process for determining whether a payor will provide coverage for a product may be separate from the process
for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors
are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of
medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific
products on an approved list, also known as a formulary, which might not include all of the approved products for a particular
indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to
conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the
product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, product
candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to cover a product
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could reduce physician utilization once the product is approved and have a material adverse effect on sales, results of operations
and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that
other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can
differ significantly from payor to payor.
The containment of health care costs also has become a priority of federal, state and foreign governments, and the prices of
products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment
programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products.
Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with
existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products.
Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement
status is attained for one or more products for which a company or its collaborators receive marketing approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and
biopharmaceutical products, limiting coverage and reimbursement for drugs, biologics and other medical products, government
control and other changes to the health care system in the United States.
In March 2010, the United States Congress enacted the ACA, which, among other things, includes changes to the coverage and
payment for drug products under government health care programs. Among the provisions of the ACA of importance to our
potential product candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and
biologic agents, apportioned among these entities according to their market share in certain government healthcare
programs;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid
coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing
a manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for
both branded and generic drugs, and revising the definition of “average manufacturer price,” or AMP, for calculating and
reporting Medicaid drug rebates on outpatient prescription drug prices;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% (and 70%
starting January 1, 2019) point-of-sale-discount off the negotiated price of applicable brand drugs to eligible
beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under
Medicare Part D; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the
Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years
2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several
government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which
will remain in effect through 2031. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act and
subsequent legislation, these Medicare reductions were reduced and suspended through the end of June 2022 with the full 2%
cut resuming thereafter.
Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional actions to
repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017 on December 22,
2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a
minimal level of health insurance, became effective in 2019. On November 10, 2020, the Supreme Court heard oral arguments
as to whether the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore
because the mandate was repealed as part of the Tax Cuts and Jobs Act of 2017, the remaining provisions of the ACA are
invalid as well. On June 17, 2021, the Supreme Court dismissed this action after finding that the plaintiffs did not have standing
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to challenge the ACA’s minimum essential coverage provision at issue in the case. Litigation and legislation over the ACA are
likely to continue, with unpredictable and uncertain results.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including directing
federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the
implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28, 2021, however, President
Biden rescinded those orders and issued a new executive order which directs federal agencies to reconsider rules and other
policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access. Under this
executive order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-existing
conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid and the ACA that may
reduce coverage or undermine the programs, including work requirements; policies that undermine the Health Insurance
Marketplace or other markets for health insurance; policies that make it more difficult to enroll in Medicaid and under the
ACA; and policies that reduce affordability of coverage or financial assistance, including for dependents.
Pharmaceutical Prices
The costs of prescription pharmaceuticals have also been the subject of considerable discussion in the United States. To date,
there have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal legislation
designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and
manufacturer patient programs, and reduce the costs of drugs under Medicare and Medicaid. To those ends, President Trump
issued several executive orders intended to lower the costs of prescription drug products. Certain of these orders are reflected in
recently promulgated regulations, including an interim final rule implementing a most favored nation model for prices that
would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other
economically advanced countries, effective January 1, 2021, but such rule has been subject to a nationwide preliminary
injunction. In December 2021, the CMS issued a final rule to rescind it. With issuance of this rule, CMS stated that it will
explore all options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to
evidence-based care.
In November 2020, the HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical
manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is
required by law. The rule went into effect on January 1, 2023. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit
managers and manufacturers, the implementation of which has been delayed until January 1, 2026 by the Infrastructure
Investment and Jobs Act. In addition, in response to an executive order from President Biden, the HHS recently released a plan
to reduce pharmaceutical prices.
More recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law by President Biden. The
new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare
Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug
coverage. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare
(beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount
program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the HHS to implement many
of these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly
single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare
Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by
15 Medicare Part D drugs in 2027, 15 Medicare Part B or Part D drugs in 2028, and 20 Medicare Part B or Part D drugs in 2029
and beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been
licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply
with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for
taking price increases that exceed inflation. The legislation also requires manufacturers to pay rebates for drugs in Medicare
Part D whose price increases exceed inflation. The new law also caps Medicare out-of-pocket drug costs at an estimated $4,000
a year in 2024 and, thereafter beginning in 2025, at $2,000 a year.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to
control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. For example, HHS and the FDA published a final rule
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allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs
from Canada into the United States. The final rule is currently the subject of ongoing litigation, but at least six states (Vermont,
Colorado, Florida, Maine, New Mexico and New Hampshire) have passed laws allowing for importation from Canada with the
intent of developing SIPs for review and approval by the FDA. A number of states have also required drug manufacturers and
other entities in the drug supply chain, including health carriers, pharmacy benefit managers and wholesale distributors, to
disclose information about pricing of pharmaceuticals. In addition, regional health care authorities and individual hospitals are
increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their
prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once
approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be
adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products
and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Review and Approval of Medicinal Products in the European Union
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding quality, safety and efficacy, and governing, among other things,
clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval
for a product, a sponsor will need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities before it
can commence clinical trials or marketing of the product in those countries or jurisdictions. Specifically, the process governing
approval of medicinal products in the EU generally follows the same lines as in the United States. It entails satisfactory
completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the
product for each proposed indication. It also requires the submission to the relevant competent authorities of a marketing
authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be
marketed and sold in the EU.
Clinical Trial Approval
Before the new Clinical Trial Regulation, (EU) No 536/2014, or the Clinical Trial Regulation came into application in January
2022, requirements for the conduct of clinical trials in the EU including GCP were set forth in the Clinical Trials Directive
2001/20/EC, or the Clinical Trials Directive, and the GCP Directive 2005/28/EC, or the GCP Directive. Under this system, a
sponsor must obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is
to be conducted. Furthermore, the sponsor may only start a clinical trial at a specific study site after the competent ethics
committee has issued a favorable opinion. The clinical trial application must be accompanied by, among other documents, an
investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by the
Clinical Trials Directive and the GCP Directive, where relevant the implementing national provisions of the individual EU
Member States and further detailed in applicable guidance documents.
In April 2014, the Clinical Trial Regulation was adopted. The Clinical Trial Regulation aims to simplify and streamline the
approval of clinical trials in the EU. The main characteristics of the regulation include: a streamlined application procedure via
a single entry point, the EU Portal and Database; a single set of documents to be prepared and submitted for the application as
well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of
applications for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU Member
States in which an application for authorization of a clinical trial has been submitted, or Concerned Member States. Part II is
assessed separately by each Concerned Member State. Strict deadlines have been established for the assessment of clinical trial
applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the
national law of the Concerned Member State. However, overall related timelines will be defined by the Clinical Trial
Regulation.
The Clinical Trial Regulation came into application on January 31, 2022 and is directly applicable in all the EU Member States,
repealing the previous Clinical Trials Directive. Conduct of all clinical trials performed in the EU were bound by previously
applicable provisions until the new Clinical Trial Regulation became applicable. If a clinical trial continues for more than three
years from the day on which the Clinical Trial Regulation became applicable, the Clinical Trial Regulation will begin to apply
to the clinical trial as of the time of its effectiveness.
Parties conducting certain clinical trials must, as in the United States, post clinical trial information in the EU at the EudraCT
website: https://eudract.ema.europa.eu.
PRIME Designation in the EU
In March 2016, the EMA launched an initiative to facilitate development of product candidates in indications, often rare, for
which few or no therapies currently exist. The priority medicines, or PRIME, scheme is intended to encourage drug
development in areas of unmet medical need and provides accelerated assessment of products representing substantial
innovation reviewed under the centralized procedure. Products from small- and medium-sized enterprises may qualify for
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earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of product candidates with
PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions
on clinical trial designs and other development program elements, and accelerated marketing authorization application
assessment once a dossier has been submitted. Importantly, a dedicated agency contact and rapporteur from the Committee for
Human Medicinal Products, or CHMP, or Committee for Advanced Therapies are appointed early in the PRIME scheme
facilitating increased understanding of the product at EMA’s Committee level.
Marketing Authorization
To obtain a marketing authorization for a product under EU regulatory systems, a sponsor must submit an MAA either under a
centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU
Member States, decentralized procedure; national procedure; or mutual recognition procedure.
The centralized procedure provides for the grant of a single marketing authorization by the EMA that is valid in all EU Member
States, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for specific products, including
for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced
therapy medicinal products, and products with a new active substance indicated for the treatment of certain diseases. For
products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for
which a centralized process is in the interest of patients, the centralized procedure may be optional. The centralized procedure
may at the request of the sponsor also be used in certain other cases. The centralized procedure is optional for products that
represent a significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest of public
health.
Under the centralized procedure, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops,
when additional information or written or oral explanation is to be provided by the sponsor in response to questions of the
CHMP. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is of major
interest from the point of view of public health and from the viewpoint of therapeutic innovation. The timeframe for the
evaluation of an MAA under the accelerated assessment procedure is 150 days, excluding stop clocks.
There are also two other possible routes to authorize medicinal products in several EU countries, which are available for
investigational medicinal products that fall outside the scope of the centralized procedure:
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Decentralized procedure. Using the decentralized procedure, a sponsor may apply for simultaneous authorization in
more than one EU country of medicinal products that have not yet been authorized in any EU country and that do not fall
within the mandatory scope of the centralized procedure. The sponsor may choose a member state as the reference
member state to lead the scientific evaluation of the application.
Mutual recognition procedure. In the mutual recognition procedure, a medicine is first authorized in one EU Member
State (which acts as the reference member state), in accordance with the national procedures of that country. Following
this, further marketing authorizations can be progressively sought from other EU countries in a procedure whereby the
countries concerned agree to recognize the validity of the original, national marketing authorization produced by the
reference member state.
Under the above-described procedures, before granting the marketing authorization, the EMA or the competent authorities of
the Member States of the European Economic Area, or EEA, make an assessment of the risk-benefit balance of the product on
the basis of scientific criteria concerning its quality, safety and efficacy.
Conditional Approval
The European Commission may also grant a so-called “conditional marketing authorization” prior to obtaining the
comprehensive clinical data required for an application for a full marketing authorization. Such conditional marketing
authorizations may be granted for product candidates (including medicines designated as orphan medicinal products), if (i) the
product candidate is intended for the treatment, prevention or medical diagnosis of seriously debilitating or life-threatening
diseases, (ii) the risk-benefit balance of the product candidate is positive; (iii) it is likely that the sponsor will be in a position to
provide the required comprehensive clinical trial data; (iv) the product fulfills an unmet medical need; and (v) the benefit to
public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the
fact that additional data are still required. A conditional marketing authorization may contain specific obligations to be fulfilled
by the marketing authorization holder, including obligations with respect to the completion of ongoing or new clinical studies,
and with respect to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and
may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or
modified conditions and/or specific obligations. The timelines for the centralized procedure described above also apply with
respect to the review by the CHMP of applications for a conditional marketing authorization, but applicants can also request the
EMA to conduct an accelerated assessment, for instance in cases of unmet medical needs.
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Regulatory Data Protection in the EU
In the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years
of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Directive
2001/83/EC. Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in accordance with the
centralized authorization procedure. Data exclusivity prevents sponsors for authorization of generics of these innovative
products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years. During an
additional two-year period of market exclusivity, a generic MAA can be submitted and authorized, and the innovator’s data
may be referenced, but no generic medicinal product can be placed on the EU market until the expiration of the market
exclusivity. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten
years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during
the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing
therapies. Even if a compound is considered to be an NCE so that the innovator gains the prescribed period of data exclusivity,
another company nevertheless could also market another version of the product
if such company obtained marketing
authorization based on an MAA with a complete independent data package of pharmaceutical, preclinical and clinical trials.
Periods of Authorization and Renewals
A marketing authorization has an initial validity for five years in principle. The marketing authorization may be renewed after
five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU
Member State. To this end, the marketing authorization holder must provide the EMA or the competent authority with a
consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing
authorization was granted, at least six months before the marketing authorization ceases to be valid. The European Commission
or the competent authorities of the EU Member States may decide, on justified grounds relating to pharmacovigilance, to
proceed with one additional five-year period of marketing authorization. Once subsequently definitively renewed, the marketing
authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the
medicinal product on the EU market (in case of centralized procedure) or on the market of the authorizing EU Member State
within three years after authorization ceases to be valid (the so-called sunset clause).
Pediatric Studies and Exclusivity
Prior to obtaining a marketing authorization in the EU, sponsors must demonstrate compliance with all measures included in an
EMA-approved Pediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has
granted a product-specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP. The
respective requirements for all marketing authorization procedures are laid down in Regulation (EC) No 1901/2006, the so-
called Pediatric Regulation. This requirement also applies when a company wants to add a new indication, pharmaceutical form
or route of administration for a medicine that is already authorized. The Pediatric Committee of the EMA, or PDCO, may grant
deferrals for some medicines, allowing a company to delay development of the medicine for children until there is enough
information to demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when development of a
medicine for children is not needed or is not appropriate, such as for diseases that only affect the adult population. Before an
MAA can be filed or an existing marketing authorization can be amended, the EMA requests that companies comply with the
agreed studies and measures listed in each relevant PIP. If a sponsor obtains a marketing authorization in all EU Member States,
or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the
pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional
six month period of qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or
SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the
marketing authorization holder.
Orphan Drug Designation and Exclusivity
Regulation (EC) No. 141/2000, as implemented by Regulation (EC) No. 847/2000 provides that a drug can be designated as an
orphan drug by the European Commission if its sponsor can establish that the product is intended for the diagnosis, prevention
or treatment of: (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons
in the EU when the application is made; or (2) a life-threatening, seriously debilitating or serious and chronic condition in the
EU and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify
the necessary investment. For either of these conditions, the sponsor must demonstrate that there exists no satisfactory method
of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists,
the drug will be of significant benefit to those affected by that condition.
Once authorized, orphan medicinal products are entitled to 10 years of market exclusivity in all EU Member States and a range
of other benefits during the development and regulatory review process, including scientific assistance for study protocols,
authorization through the centralized marketing authorization procedure covering all member countries, and a reduction or
elimination of registration and marketing authorization fees. However, marketing authorization may be granted to a similar
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medicinal product with the same orphan indication during the 10-year period with the consent of the marketing authorization
holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to
supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan
indication if this product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The
period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available
evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.
Patent Term Extensions
The EU also provides for patent term extension through SPCs. The rules and requirements for obtaining an SPC are similar to
those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled expiration
date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug. In certain circumstances, these
periods may be extended for six additional months if pediatric exclusivity is obtained. Although SPCs are available throughout
the EU, sponsors must apply on a country by country basis. Similar patent term extension rights exist in certain other foreign
jurisdictions outside the EU.
Regulatory Requirements after a Marketing Authorization has been Obtained
When an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is required to
comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products.
These include:
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•
•
The EU’s pharmacovigilance or safety reporting rules, which can impose post-authorization studies and additional
monitoring obligations.
The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must
also be conducted in strict compliance with the applicable EU laws, regulations and guidance, including Directive
2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good
Manufacturing Practice. These requirements include compliance with EU cGMP standards when manufacturing
medicinal products and API, including the manufacture of API outside of the EU with the intention to import the API
into the EU.
The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and
advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU notably
under Directive 2001/83EC, as amended, and EU Member State laws. Direct-to-consumer advertising of prescription
medicines is prohibited across the EU.
General Data Protection Regulation
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal
health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The
GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including
requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal
data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the
security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the
EU, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR,
including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a
private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial
remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR will be a
rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business
practices to ensure full compliance. In July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-
U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the
United States. The CJEU decision also drew into question the long-term viability of an alternative means of data transfer, the
standard contractual clauses, for transfers of personal data from the EEA to the United States.
Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S. Data Privacy Framework,
which would serve as a replacement to the EU-U.S. Privacy Shield. The EC initiated the process to adopt an adequacy decision
for the EU-U.S. Data Privacy Framework in December 2022. It is unclear if and when the framework will be finalized and
whether it will be challenged in court. The uncertainty around this issue may further impact our business operations in the EU.
Following the withdrawal of the U.K. from the EU, the U.K. Data Protection Act 2018 applies to the processing of personal
data that takes place in the U.K. and includes parallel obligations to those set forth by GDPR, including in relation to data
transfers.
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Brexit and the Regulatory Framework in the United Kingdom
The U.K.'s withdrawal from the EU took place on January 31, 2020. As of January 1, 2021, the Medicines and Healthcare
products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great
Britain, comprising England, Scotland and Wales under domestic law whereas Northern Ireland continues to be subject to EU
rules under the Northern Ireland Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as
amended), or HMR, as the basis for regulating medicines. The HMR has incorporated into the domestic law, the body of EU
law instruments governing medicinal products that pre-existed prior to the U.K.’s withdrawal from the EU. Since a significant
proportion of the regulatory framework for pharmaceutical products in the U.K. covering the quality, safety, and efficacy of
pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products
is derived from EU directives and regulations, Brexit may have a material impact upon the regulatory regime with respect to the
development, manufacture, importation, approval and commercialization of our product candidates in the U.K. For example, the
U.K. is no longer covered by the centralized procedures for obtaining EU-wide marketing authorization from the EMA, and a
separate marketing authorization will be required to market any product candidates in the U.K. Until December 31, 2023, it is
possible for the MHRA to rely on a decision taken by the European Commission/EMA's CHMP on the approval of a new
marketing authorization via the centralized procedure, which is the Reliance Procedure.
Pricing Decisions for Approved Products
In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may
be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies
that compare the cost-effectiveness of a particular product candidate to currently available therapies or so-called health
technology assessments, in order to obtain reimbursement or pricing approval. For example, the EU provides options for its
Member States to restrict the range of products for which their national health insurance systems provide reimbursement and to
control the prices of medicinal products for human use. Member States may approve a specific price for a product or it may
instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other
Member States allow companies to fix their own prices for products, but monitor and control prescription volumes and issue
guidance to physicians to limit prescriptions. Recently, many countries in the EU have increased the amount of discounts
required on pharmaceuticals, and these efforts could continue as countries attempt to manage health care expenditures,
especially in light of the severe fiscal and debt crises experienced by many countries in the EU. The downward pressure on
health care costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are
being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing
negotiations, and there negotiations may continue after reimbursement has been obtained. Reference pricing used by various
Member States, and parallel trade (i.e., arbitrage between low-priced and high-priced Member States), can further reduce prices.
There can be no assurance that any country with price controls or reimbursement limitations for pharmaceutical products will
allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.
Segment Reporting and Geographical Information
We are engaged solely in the discovery and development of medicines in the field of cellular metabolism. Accordingly, we have
determined that we operate in one operating segment.
Employees and Human Capital
As of December 31, 2022, we had 389 full-time employees and 4 part-time employees, all based in the United States and of
which 101 held Ph.D., Pharm.D. or M.D. degrees. None of our employees are represented by a labor union or covered under a
collective bargaining agreement. We also retain independent contractors to support the goals of our organization. We prioritize
our employee experience and we are proud of our strong employee and contractor relations.
We understand that attracting, retaining, engaging and supporting our talented team and maintaining a diverse and inclusive
organization is critical to our success and our ability to increase the value we can provide for patients, shareholders and all
stakeholders.
We strive to cultivate a positive, respectful and fair work environment guided by the following three pillars:
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Flexibility: We provide flexible work arrangements which result in happier, more engaged and more productive
employees. We encourage a culture that promotes different perspectives, different work styles, health and wellness,
care of families and productivity.
Psychological safety: We aim to ensure our teams experience psychological safety – the belief that risk-taking and
failure will not be punished, which leads to higher performing teams, more creativity, candor and better results.
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•
Deliberate development: We emphasize providing ongoing opportunities for employees to grow professionally,
whether through bringing in external speakers, offering preceptorships in different departments, and providing tuition
reimbursement and leadership skills training.
To incentivize and reward strong performance, we have established a competitive and balanced compensation and benefits
package, including short-term and long-term incentives, discretionary paid time off policy, generous parental and family leave
plans and premium medical benefits.
We are committed to fostering a welcoming and diverse workplace in which individuals from a variety of backgrounds can
thrive. Our diversity and inclusion program focuses on valuing three types of differences:
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Representative differences (demographic diversity, such as gender, race, ethnicity, sexual orientation)
Experiential differences (identities based on life experiences that may change over time)
Cognitive differences (unique ways of understanding and interpreting the world)
We are a majority female organization and we maintain significant representation at all levels, including the Board of Directors.
As of December 31, 2022, 59% of our workforce were women. Racial and ethnic diversity continues to be an area of focus for
improvement at the Company. As of December 31, 2022, 31% of our workforce were ethnically diverse and 38% of all new
hires that joined the Company in 2022 were ethnically diverse. We have an active cross-functional diversity council that
furthers our commitment to building a diverse and inclusive organization by:
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•
Representing and reflecting the different voices in the Agios community
Furthering the work of diversity, equity and inclusion at Agios and in our communities
• Working in partnership with our leadership, human resources and employee resource groups to share, drive and lead
our diversity, equity and inclusion efforts
We recognize that there is still important progress to be made, particularly as it relates to Black and Latino representation at our
company, and this remains an area of continued emphasis for us.
We regularly evaluate the effectiveness of our human capital management practices through employee surveys and fostering a
culture of ongoing feedback and two-way dialogue. In addition, we track important human capital metrics such as turnover rate.
Voluntary and involuntary turnover rates across all levels (executives/ senior managers, mid-level managers and professionals)
are in alignment with, or lower than, the industry average.
The COVID-19 pandemic evolved throughout 2022 and we continued to demonstrate our commitment to the health and well-
being of our employees, our patients and our community. We continue to monitor local and national public health data to
determine if adjustment to our work practices is needed. We have maintained a mandatory vaccination policy for all employees,
regardless of their role or work locations, subject to limited exceptions. Thoughtful management of our COVID-19 response
continues to be a priority for our leadership team.
We have maintained our "Future of Work” policy providing employees whose roles do not require an onsite or in field presence
with an opportunity to choose the right working arrangement for them: whether remote; hybrid with time split between home or
the office; or primarily onsite in our Cambridge office, and we continue to evaluate how we can enhance these arrangements for
an optimal employee experience. The opportunity to work remotely has enabled us to hire a more diverse team including
individuals from different locations and backgrounds and with a variety of responsibilities in their personal lives. In 2022, 67%
of our new hires chose to work remotely.
We believe our ability to embrace change and our long-standing culture and values around flexibility and connection have
helped us deliver for patients.
Our Corporate Information
Our executive offices are located at 88 Sidney Street, Cambridge, Massachusetts 02139, and our telephone number is
(617) 649-8600. Our website address is www.agios.com. References to our website are inactive textual references only and the
content of our website should not be deemed incorporated by reference into this Form 10-K.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to
these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are
available free of charge on our website located at www.agios.com as soon as reasonably practicable after they are filed with or
furnished to the Securities and Exchange Commission, or SEC. These reports are also available at the SEC’s website at
www.sec.gov.
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A copy of our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the Audit
Committee, Compensation & People Committee, and Nominating and Corporate Governance Committee are posted on our
website, www.agios.com, under the heading “Corporate Governance” and are available in print to any person who requests
copies by contacting us by calling (617) 649-8600 or by writing to Agios Pharmaceuticals, Inc., 88 Sidney Street, Cambridge,
Massachusetts 02139.
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Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered.
The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties
not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 1
of this Annual Report on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk
factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects
could be materially and adversely affected.
Risks Related to the Discovery, Development, and Commercialization of our Products and Product Candidates
If we do not successfully commercialize PYRUKYND® and other products for which we receive approval, our prospects may
be substantially harmed.
In February 2022, we obtained marketing approval from the FDA for PYRUKYND® (mitapivat) for the treatment of hemolytic
anemia in adults with pyruvate kinase (PK) deficiency in the United States. In November 2022, we received marketing
authorization from the European Commission for PYRUKYND® for the treatment of PK deficiency in adult patients in the EU,
and in December 2022 we received marketing authorization in Great Britain for PYRUKYND® for the treatment of PK
deficiency in adult patients under the European Commission Decision Reliance Procedure. PYRUKYND® is the first product
for which we have received marketing approval following the sale of our oncology business to Servier in March 2021 and
PYRUKYND® is the first product in our rare disease portfolio that has received marketing approval. As of the date of this
Annual Report on Form 10-K, we are in the process of commercially launching PYRUKYND® in the United States. Our ability
successful development and
to generate meaningful
commercialization of the product.
revenue from PYRUKYND® will depend heavily on our
The development and commercialization of PYRUKYND® could be unsuccessful if:
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•
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•
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•
the medical community and third-party payors do not accept PYRUKYND® as safe, efficacious and cost-effective for
the treatment of adults with PK deficiency in the approved jurisdictions;
we fail to maintain the necessary financial resources and expertise to manufacture, market and sell PYRUKYND®;
we fail to develop, implement and maintain effective marketing, sales and distribution strategies and operations for the
development and commercialization of PYRUKYND®;
we fail to continue to develop, validate and maintain a commercially viable manufacturing process for PYRUKYND®
that is compliant with current good manufacturing practices, or cGMP;
we fail to successfully obtain third party reimbursement and generate commercial demand that results in sales of
PYRUKYND®;
PYRUKYND® or any product candidate that we commercialize, may become subject
regulations and third-party reimbursement practices, which would harm our business;
to unfavorable pricing
we encounter any third-party patent interference, derivation, inter partes review, post-grant review, reexamination or
patent infringement claims with respect to PYRUKYND®;
we fail to comply with regulatory and legal requirements applicable to the sale of PYRUKYND®;
competing drug products are approved for the same indications as PYRUKYND®;
we fail to obtain marketing approval of PYRUKYND® in other indications;
new significant safety, manufacturing and/or quality risks are identified;
we fail to gain and/or maintain sufficient market acceptance by physicians, patients, healthcare payors and others in the
medical community;
a significant number of eligible patients with PK deficiency are not prescribed PYRUKYND® and, if they are, such
patients do not stay on treatment; or
PYRUKYND® does not demonstrate acceptable safety and efficacy in current or future clinical trials, or otherwise
does not meet applicable regulatory standards for approval in indications other than currently approved indication.
If we experience significant delays or an inability to successfully develop and commercialize PYRUKYND® our business
would be materially harmed.
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We depend heavily on the success of our clinical product candidates, including our lead product candidate PYRUKYND®,
upon approval, for use in indications other than PK deficiency. Clinical trials of our product candidates may not be
successful for a number of important reasons. If we or our collaborators are unable to commercialize our product
candidates or experience significant delays in doing so, our business will be materially harmed.
We have invested a significant portion of our efforts and financial resources in the identification of our product candidates and
development of our most advanced clinical programs, including PYRUKYND®. Our ability to generate meaningful product
revenue will depend heavily on the successful clinical development and eventual commercialization of our current and any
future product candidates, including PYRUKYND®. While we obtained marketing approval of PYRUKYND® for the
treatment of hemolytic anemia in adults with PK deficiency in the United States and marketing authorization of PYRUKYND®
for the treatment of adults with PK deficiency in the European Union and Great Britain, we cannot be certain that we will obtain
marketing approval of PYRUKYND® in indications other than PK deficiency.
We, and any collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United
States without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the EMA, impose similar
requirements in foreign jurisdictions. Before obtaining marketing approval from regulatory authorities for the sale of our
product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the
safety and efficacy of our product candidates in humans.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.
We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical
development of our product candidates is susceptible to the risk of failure inherent at any stage of product development.
Moreover, we, or any collaborators, may experience any of a number of possible unforeseen adverse events in connection with
clinical trials, many of which are beyond our control, including:
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we, or our collaborators, may fail to demonstrate efficacy in a clinical trial or across a broad population of patients;
it is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected
during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design,
measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials
may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. For
initially showed promise in earlier stage testing for treating specific disease
example, many compounds that
indications have later been found to cause side effects that prevented further development of the compound;
our product candidates may have undesirable side effects or other unexpected characteristics or otherwise expose
participants to unacceptable health risks, causing us, our collaborators or our investigators, regulators or institutional
review boards or the data safety monitoring board for such trial to halt, delay, interrupt, suspend or terminate the trials
or cause us, or any collaborators, to abandon development or limit development of that product candidate to certain
uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or
more acceptable from a risk-benefit perspective;
if our product candidates have undesirable side effects, it could result in a more restrictive label, or it could result in
the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities;
clinical trials of our product candidates may produce negative or inconclusive results, and we, or our collaborators,
may decide, or regulators may require us, to conduct additional clinical trials, including testing in more subjects, or
abandon product development programs;
regulators or institutional review boards may not authorize us, our collaborators or our investigators to commence a
clinical trial or conduct a clinical trial at a prospective trial site;
we or our collaborators may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or
clinical trial protocols with prospective trial sites;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate;
enrollment in these clinical trials, which may be particularly challenging for some of the orphan diseases we target in
our rare disease programs, may be slower than we anticipate; or participants may drop out of these clinical trials at a
higher rate than we anticipate;
third-party contractors used by us or our collaborators may fail to comply with regulatory requirements or meet their
contractual obligations in a timely manner, or at all;
significant preclinical study or clinical trial delays could shorten any periods during which we, or any collaborators,
may have the exclusive right to commercialize our product candidates or allow our competitors, or the competitors of
any collaborators, to bring products to market before we, or any collaborators, do;
the cost of clinical trials of our product candidates may be greater than anticipated; and,
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•
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product
candidates may be insufficient or inadequate.
In December 2016, we withdrew our IND for AG-519, our second PK activator, following verbal notification of a clinical hold
from the FDA relating to a previously disclosed case of drug-induced cholestatic hepatitis which occurred in our phase 1
clinical trial of AG-519 in healthy volunteers. Although these decisions and this hepatic adverse event finding do not affect our
ongoing clinical trials for PYRUKYND®, our first PK activator, we cannot provide any assurances that there will not be similar
or other treatment-related severe adverse events in our other clinical trials of PYRUKYND®, that our other trials will not be
placed on clinical hold in the future, or that patient recruitment for our other trials will not be adversely impacted.
Our failure to successfully begin and complete clinical trials of our product candidates and to demonstrate the efficacy and
safety necessary to obtain regulatory approval to market any of our product candidates could result in additional costs to us, or
any collaborators, would impair our ability to generate revenue from product sales, regulatory and commercialization
milestones and royalties and would significantly harm our business.
We may engage in in-licensing transactions or acquisitions that could disrupt our business, cause dilution to our
stockholders or reduce our financial resources.
We may in the future enter into transactions to in-license products, technologies or assets or to acquire other products,
technologies, assets or businesses. As part of the evolution of our research organization, we plan to prioritize in-licensing or
acquiring assets for future pipeline growth. Because we have not made any acquisitions to date, our ability to do so successfully
in the future is unproven. If we do identify suitable candidates or assets for in-licensing transactions or acquisitions, we may not
be able to make such transactions on favorable terms, or at all. Any in-licensing transaction or acquisitions we undertake may
not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may
decide to incur debt in connection with an acquisition or an in-licensing transaction or issue our common stock or other equity
securities to the stockholders of the counterparty, which would reduce the percentage ownership of our existing stockholders.
We could incur losses resulting from undiscovered liabilities of the acquired business, product or technology that are not
covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the
acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner.
Such transactions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our
cash available for operations and other uses. We cannot ensure that following any transaction we would achieve the expected
synergies to justify the transactions. We cannot predict the number, timing or size of future transactions or the effect that any
such transactions might have on our operating results.
The COVID-19 pandemic has and may in the future affect our ability to initiate or continue our planned, ongoing and
future preclinical studies, clinical
trials, disrupt regulatory activities, disrupt our ability to maintain a commercial
infrastructure for our product or have other adverse effects on our business and operations. In addition, this pandemic may
continue to adversely impact economies worldwide, which could result in adverse effects on our business and operations.
In response to the COVID-19 pandemic, we began requiring all employees, regardless of role or work location, to be fully
vaccinated against COVID-19, as defined by CDC guidelines, subject to limited exceptions.
We may face disruptions that may affect our ability to initiate and complete preclinical studies and clinical trials including
disruptions in procuring items that are essential for our research and development activities, including, for example, raw
materials used in the manufacturing of our product candidates and laboratory supplies for planned and ongoing clinical trials, in
each case, for which there may be shortages because of ongoing efforts to address the outbreak. Although we have experienced
disruptions to certain clinical and research activities at our contract research organizations, or CROs, due to recent COVID-19
surges, we have enrolled, and seek to enroll, patients in our clinical trials at sites located both in the United States and
internationally. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials,
study monitoring and data analysis was and may again in the future be paused or delayed due to changes in hospital or
university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other
reasons related to the pandemic. We have faced and may in the future face difficulties recruiting or retaining patients in our
ongoing clinical trials because of the pandemic. Patients enrolled in our clinical trials may be unable or unwilling to visit
clinical trial sites which may impact the collection of important clinical trial data and has, and may in the future, necessitate
remote data verification. In addition, limitations on the ability to visit sites has affected, and may continue to affect, our
enrollment timelines for our clinical trials, and may adversely affect the timing of completion of our clinical trials or our ability
to complete clinical trials in a fully compliant manner. Additionally, the potential suspension of clinical trial activity at clinical
trial sites or reduced availability of CRO personnel may have an adverse impact on our clinical trial plans and timelines.
We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party
manufacturers, other than certain CROs based in China, remain largely unaffected, with any campaign delays experienced to
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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.
We have faced and may in the future face disruptions in our ability to prepare and submit applications to regulatory authorities
for drug approvals and to build and maintain a commercial infrastructure for our product and product candidates. We may face
manufacturing disruptions or disruptions related to the ability to obtain necessary institutional review board or other necessary
site approvals, as well as other delays at clinical trial sites.
The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in
a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition,
we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.
The COVID-19 pandemic may continue to significantly impact economies and financial markets worldwide, which could result
in adverse effects on our business and operations, impact our ability to raise additional funds through public offerings and
impact the volatility of our stock price and trading in our stock. We cannot be certain what the overall impact of the COVID-19
pandemic will be on our business in the future and a continuation of the pandemic has the potential to adversely affect our
business, financial condition, results of operations, and prospects.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory
approvals could be delayed or prevented.
We or our collaborators may not be able to initiate, continue or complete clinical trials for our product candidates if we or they
are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or
analogous regulatory authorities outside the United States. Furthermore, enrollment has been and may in the future be
particularly challenging in light of the ongoing COVID-19 pandemic and even more so for some of the orphan diseases we
target in our rare disease programs.
Patient enrollment is also affected by other factors including:
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prevalence and severity of the disease under investigation;
availability and efficacy of approved medications for the disease under investigation;
eligibility criteria for the study in question;
perceived risks and benefits of the product candidate under study;
efforts to facilitate timely enrollment in clinical trials;
patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment; and
proximity and availability of clinical trial sites for prospective patients.
Utilizing our precision medicine approach, we generally focus our development activities on genetically or biomarker defined
patients most likely to respond to our therapies. As a result, the potential patient populations for our clinical trials are narrowed,
and we may experience difficulties in identifying and enrolling a sufficient number of patients in our clinical trials.
In addition, some of our competitors may have ongoing or planned clinical trials for product candidates that would treat the
same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead
enroll in clinical trials of our competitors’ product candidates. For example, Rocket Pharma LTD, or Rocket Pharma, is
developing a gene therapy targeting PK deficiency; Vertex Pharmaceuticals Incorporated, or Vertex, is developing a gene
therapy targeting SCD; Novo Nordisk is developing molecules for the treatment of beta thalassemia and SCD; Pfizer is
developing molecules for the treatment of SCD; Fibrogen, Inc. is developing roxadustat for the treatment of anemia in MDS
patients; Geron Corporation is developing imetelstat for the treatment of LR MDS; Roivant Sciences is developing RVT-2001
(licensed from Eisai Co., Ltd.) for the treatment of transfusion-dependent anemia in patients with LR MDS; and PTC
Therapeutics, Inc., or PTC, Synlogic, Inc., or Synlogic, and Jnana Therapeutics, Inc., or Jnana, are developing therapies to treat
PKU. Competition for eligible patients may make it particularly difficult for us to enroll a sufficient number of patients to
complete our clinical trials for our product candidates in a timely and cost-effective manner.
We rely on CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have
agreements governing their committed activities, we have limited influence over their actual performance. Our or our
collaborators’ inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may
require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased
development costs for our product candidates, which would cause the value of our company to decline and limit our ability to
obtain additional financing.
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Results of preclinical studies and early clinical trials may not be predictive of results of later-stage clinical trials.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and
interim results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in
earlier stages of development, and we could face similar setbacks. The design of a clinical trial can determine whether its results
will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is
well advanced. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many
companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have
nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the
results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory
authorities may disagree and may not grant marketing approval of our product candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same
product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size
and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the
rate of dropout among clinical trial participants. While we obtained marketing approval of PYRUKYND® for the treatment of
hemolytic anemia in adults with PK deficiency in the United States and marketing authorization of PYRUKYND® for the
treatment of adults with PK deficiency in the European Union and Great Britain, we cannot be certain that we will obtain
marketing approval of PYRUKYND® in other indications. The results of clinical trials of PYRUKYND® for the treatment of
PK deficiency do not predict that PYRUKYND® will be efficacious in our ongoing clinical trials in other indications. If we fail
to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and
commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial
prospects would be negatively impacted.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product
candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and product candidates that we
identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or
for other indications that later prove to have greater commercial potential. We have decided to evolve our approach to
exploratory research and drug discovery to prioritize investment in advancing our late lead-optimization research, while
continuing to progress our registration-enabling clinical programs in thalassemia, SCD and pediatric PK deficiency, our phase
2a trial in LR MDS and our IND-enabling studies for our PAH stabilizer for the treatment of PKU. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial medicines or profitable market opportunities. Our spending on
current and future research and development programs and product candidates for specific indications may not yield any
commercially viable medicines. If we do not accurately evaluate the commercial potential or target market for a particular
product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty
arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization
rights to such product candidate.
We or others may later discover that PYRUKYND®, or any of our product candidates that may receive marketing approval
in the future, is less effective than previously believed or causes undesirable side effects that were not previously identified,
which could compromise our ability, or that of any collaborators, to market the product.
It is possible that our clinical trials, or those of any collaborators, may indicate an apparent positive effect of a product
candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If,
following approval of a product candidate, including PYRUKYND®, we, or others, discover that the product is less effective
than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse
events could occur:
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regulatory authorities may withdraw their approval of the product or seize the product;
we, or any collaborators, may be required to recall the product, change the way the product is administered or conduct
additional clinical trials;
additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product;
we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
regulatory authorities may require the addition of labeling statements;
we, or any collaborators, may be required to create a Medication Guide outlining the risks of the previously
unidentified side effects for distribution to patients;
we, or any collaborators, could be sued and held liable for harm caused to patients;
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the product may become less competitive; and
our reputation may suffer.
PYRUKYND®, or any of our product candidates that may receive marketing approval in the future, may fail to achieve the
degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for
commercial success.
PYRUKYND®, or any of our product candidates that may receive marketing approval in the future, may fail to gain and/or
maintain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. If
PYRUKYND® or any of our product candidates that may receive marketing approval do not achieve an adequate level of
acceptance, we may not generate significant product revenue and we may not become profitable. The degree of market
acceptance of PYRUKYND® and any of our product candidates, if approved for commercial sale, will depend on a number of
factors, including:
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efficacy and potential advantages compared to alternative treatments;
the ability to offer our medicines for sale at competitive prices;
convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
ensuring uninterrupted product supply;
the strength of marketing and distribution support;
sufficient third-party coverage or reimbursement; and
the prevalence and severity of any side effects.
If we are unable to maintain sales and marketing capabilities or enter into agreements with third parties to sell and market
our product candidates, we may not be successful in commercializing PYRUKYND® or our product candidates if they are
approved.
We have limited experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success
for approved medicines for which we retain sales and marketing responsibilities, we must either develop a sales and marketing
organization or outsource these functions to other third parties. Although we have established sales and marketing capabilities
to support our commercial launch of PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the
United States and are currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great
Britain through a global managed access program, we may need to further build our sales and marketing infrastructure, either
directly or with a third-party partner, to maintain our ongoing commercialization efforts and to commercialize PYRUKYND®
in other indications or outside of the United States or to commercialize any of our other product candidates for which we obtain
marketing approval.
There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with
third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and
could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish
marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these
commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales
and marketing personnel.
Factors that may inhibit our efforts to commercialize our medicines on our own include:
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our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe
any future medicines;
the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive disadvantage
relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the
profitability of product revenue to us are likely to be lower than if we were to market and sell any medicines that we develop
ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product
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candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties,
and any of them may fail to devote the necessary resources and attention to sell and market our medicines effectively. If we do
not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not
be successful in commercializing PYRUKYND® or any of our product candidates for which we obtain marketing approval.
We face substantial competition, which may result in others discovering, developing or commercializing products before or
more successfully than we do.
We face competition with respect to PYRUKYND® and our current product candidates, and we will face competition with
respect to any product candidates that we may seek to develop or commercialize in the future. Potential competitors include
major pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies, academic institutions,
government agencies and other public and private research organizations that conduct research, seek patent protection and
establish collaborative arrangements for research, development, manufacturing and commercialization. There are a number of
large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of
products for the treatment of the disease indications for which we are developing our product or our product candidates, such as
PK deficiency, thalassemia, SCD and LR MDS. For example, Merck & Co., Inc. and bluebird bio, Inc., or bluebird, are each
marketing therapies to treat beta thalassemia, Novartis International AG, Emmaus Life Sciences and Pfizer are each marketing
therapies to treat SCD, Rocket Pharma is conducting a clinical trial of a gene therapy targeting PK deficiency, Fulcrum
Therapeutics, Inc. is developing a potential treatment for SCD, and a number of other biotechnology companies have product
candidates in clinical development in similar indications as ours.
There are a variety of treatment options available, including a number of marketed enzyme replacement therapies, for treating
patients with rare diseases. In addition to currently marketed therapies, there are also a number of products that are either
enzyme replacement therapies, gene therapies or PK activators in various stages of clinical development to treat rare diseases.
These products in development may provide efficacy, safety, convenience and other benefits that are not provided by currently
marketed therapies or for which there are no approved treatments. As a result, they may provide significant competition for any
of our product candidates for which we obtain marketing approval.
There are also a number of product candidates in preclinical or clinical development by third parties to treat rare diseases by
targeting similar mechanisms of action or target indications as our product candidates. These companies include large
pharmaceutical companies, such as Novartis, as well as biotechnology companies of various sizes, such as BioMarin
Pharmaceutical Inc., bluebird, Novo Nordisk, PTC, Rocket Pharma, and Vertex. Our competitors may develop products that are
more effective, safer, more convenient or less costly than PYRUKYND® or any product candidates that we are developing or
that would render PYRUKYND® or our product candidates obsolete or non-competitive. In addition, our competitors may
discover biomarkers that more efficiently measure metabolic pathways than our methods, which may give them a competitive
advantage in developing potential products. Our competitors may also obtain marketing approval from the FDA or other
regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our
competitors establishing a strong market position before we are able to enter the market.
Many of our competitors have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and globally marketing approved
products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our competitors. Smaller and clinical stage companies may also prove
to be significant competitors, particularly through collaborative arrangements with large and established companies. These third
parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring or in-licensing technologies complementary to, or
necessary for, our programs.
If the FDA does not grant our products, if and when approved, appropriate periods of data exclusivity before approving
generic or follow-on versions of our products, the sales of our products could be adversely affected.
With FDA approval of an NDA, the product covered by the application is specified as a “reference-listed drug” in the FDA’s
publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers may
seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or
ANDAs, in the United States.
In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the sponsor generally must show that
its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as
the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the
body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the
reference-listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus,
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following the introduction of a generic drug, a significant percentage of the sales of any reference-listed drug may be typically
lost to the generic product.
A manufacturer may also submit an NDA under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FDCA, that
references the FDA’s prior approval of the innovator product or preclinical studies and/or clinical trials that were not conducted
by, or for, the sponsor and for which the sponsor has not obtained a right of reference. A 505(b)(2) NDA product, or follow-
product, may be for a new or improved version of the original reference listed drug.
The FDA may not approve an ANDA or 505(b)(2) NDA until any applicable period of non-patent exclusivity for the reference-
listed drug has expired. The FDCA provides a period of five years of new chemical entity exclusivity for a new drug containing
a new active moiety. Specifically, in cases where such exclusivity has been granted, an ANDA or a 505(b)(2) NDA may not be
filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a
patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the
sponsor may submit its application four years following approval of the reference-listed drug. The FDCA also provides a period
of three years of new clinical investigation data exclusivity in connection with the approval of a supplemental indication for the
product for which a clinical trial is deemed by the FDA as essential for approval.
In the event that a generic or follow-on manufacturer is somehow able to obtain FDA approval without adherence to these
periods of data exclusivity, the competition that our approved products may face from generic and follow-on versions could
negatively impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on our
investments in those product candidates.
In addition, if there are patents listed for our drug products in the Orange Book, ANDAs and 505(b)(2) NDAs would be
required to include a certification as to each listed patent indicating whether the sponsor intends to challenge the patent. We
cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in
the Orange Book, how any generic or follow-on competitor would address such patents, whether we would sue on any such
patents or the outcome of any such suit.
Product liability lawsuits against us or any collaborators could cause us or our collaborators to incur substantial liabilities
and could limit commercialization of any medicines that we or they may develop.
We and any collaborators face a risk of product liability exposure related to our product candidates in human clinical trials and
face an even greater risk as we or they commercially sell any medicines, including PYRUKYND®. If we or any collaborators
cannot successfully defend ourselves or themselves against claims that our product candidates or medicines caused injuries, we
or they could incur substantial costs and liabilities. Regardless of merit or eventual outcome, liability claims may also result in,
among other thing, decreased demand for any product candidates or medicines that we may develop, reputational harm and lost
revenue.
Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur.
Our internal computer systems, or those of any third parties with which we contract, may fail or suffer security breaches,
which could result in a material disruption of our product development programs.
Despite the implementation of security measures, our internal computer systems and those of third parties with which we
contract are vulnerable to damage from computer viruses, worms and other destructive or disruptive software, unauthorized
access, natural disasters, terrorism, war and telecommunication and electrical failures. Such systems are also vulnerable to
service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/
or business partners, or from cyber incidents by malicious third parties. Cyber incidents are increasing in their frequency,
sophistication and intensity, and have become increasingly difficult to detect. Cyber incidents could include the deployment of
harmful malware, ransomware, denial-of-service attacks, unauthorized access to or deletion of files, social engineering and
other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Cyber
incidents also could include phishing attempts or e-mail fraud to cause payments or information to be transmitted to an
unintended recipient. We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or
accidental release or loss of information maintained in the information systems and networks of our company, including
personal information of our employees.
System failures, accidents, cyber incidents or security breaches could cause interruptions in our operations, and could result in a
material disruption of our clinical and commercialization activities and business operations, whether due to a loss of our trade
secrets or other proprietary information or other similar disruptions, in addition to possibly requiring substantial expenditures of
resources to remedy. For example, the loss of clinical trial data from completed or future trials could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any
disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability, our competitive position could be harmed and our product
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research, development and commercialization efforts could be delayed. In addition, we may not have adequate insurance
coverage to provide compensation for any losses associated with such events.
If a material breach of our security or that of our vendors occurs, the market perception of the effectiveness of our security
measures could be harmed, we could lose business and our reputation and credibility could be damaged. We could be required
to expend significant amounts of money and other resources to repair or replace information systems or networks. Although we
develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify
and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing
monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated.
Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.
We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related
to data privacy and security and changes in such laws, regulations, policies, contractual obligations and failure to comply
with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our
business, financial condition or results of operations.
We are subject to data privacy and protection laws and regulations that apply to the collection, transmission, storage and use of
personally-identifying information, which among other things, impose certain requirements relating to the privacy, security and
transmission of personal information, including comprehensive regulatory systems in the United States, EU and UK. The
legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there
has been an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply
with any of these laws and regulations could result in enforcement action against us, including fines, imprisonment of company
officials and public censure, claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of
which could have a material adverse effect on our business, financial condition, results of operations or prospects.
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information. In
particular, regulations promulgated pursuant to HIPAA establish privacy and security standards that limit the use and disclosure
of
individually identifiable health information, or protected health information, and require the implementation of
administrative, physical and technological safeguards to protect the privacy of protected health information and ensure the
confidentiality, integrity and availability of electronic protected health information. Determining whether protected health
information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex
and may be subject to changing interpretation. These obligations may be applicable to some or all of our business activities now
or in the future.
If we are unable to properly protect the privacy and security of protected health information, we could be found to have
breached our contracts. Further, if we fail to comply with applicable privacy laws, including applicable HIPAA privacy and
security standards, we could face civil and criminal penalties. HHS enforcement activity can result in financial liability and
reputational harm, and responses to such enforcement activity can consume significant internal resources. In addition, state
attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that
threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced or applied to our
operations. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing
efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing
modifications to our policies, procedures and systems.
In 2018, California passed into law the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020 and
imposed many requirements on businesses that process the personal information of California residents. Many of the CCPA’s
requirements are similar to those found in the General Data Protection Regulation, or GDPR, including requiring businesses to
provide notice to data subjects regarding the information collected about them and how such information is used and shared,
and providing data subjects the right to request access to such personal information and, in certain cases, request the erasure of
such personal information. The CCPA also affords California residents the right to opt-out of “sales” of their personal
information. The CCPA contains significant penalties for companies that violate its requirements. In November 2020,
California voters passed a ballot initiative for the California Privacy Rights Act, or CPRA, which went into effect on January 1,
2023 and significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use,
retention, and sharing of personal information of California residents be reasonably necessary and proportionate to the purposes
of collection or processing, granting additional protections for sensitive personal information, and requiring greater disclosures
related to notice to residents regarding retention of information. The CPRA also created a new enforcement agency – the
California Privacy Protection Agency – whose sole responsibility is to enforce the CPRA, which will further increase
compliance risk. The provisions in the CPRA may apply to some of our business activities. In addition, other states, including
Virginia, Colorado, Utah, and Connecticut already have passed state privacy laws. Virginia’s privacy law also went into effect
on January 1, 2023, and the laws in the other three states will go into effect later in the year. Other states will be considering
these laws in the future, and Congress has also been debating passing a federal privacy law. These laws may impact our
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business activities, including our identification of research subjects, relationships with business partners and ultimately the
marketing and distribution of our products.
Similar to the laws in the United States, there are significant privacy and data security laws that apply in Europe and other
countries. The collection, use, disclosure, transfer, or other processing of personal data, including personal health data,
regarding individuals who are located in the EEA, and the processing of personal data that takes place in the EEA, is regulated
by the GDPR, which went into effect in May 2018 and which imposes obligations on companies that operate in our industry
with respect to the processing of personal data and the cross-border transfer of such data. The GDPR imposes onerous
accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies. If
our or our partners’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we
may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data
and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year,
whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a
potential loss of business and goodwill.
The GDPR places restrictions on the cross-border transfer of personal data from the EU to countries that have not been found
by the European Commission to offer adequate data protection legislation, such as the United States. There are ongoing
concerns about the ability of companies to transfer personal data from the EU to other countries. In July 2020, the Court of
Justice of the European Union, or the CJEU, invalidated the EU-U.S. Privacy Shield, one of the mechanisms used to legitimize
the transfer of personal data from the EEA to the U.S. The CJEU decision also drew into question the long-term viability of an
alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EEA to the U.S.
While we were not self-certified under the Privacy Shield, this CJEU decision may lead to increased scrutiny on data transfers
from the EEA to the U.S. generally and increase our costs of compliance with data privacy legislation as well as our costs of
negotiating appropriate privacy and security agreements with our vendors and business partners.
Additionally, in October 2022, President Joe Biden signed an executive order to implement the EU-U.S. Data Privacy
Framework, which would serve as a replacement to the EU-U.S. Privacy Shield. The European Commission initiated the
process to adopt an adequacy decision for the EU-U.S. Data Privacy Framework in December 2022. It is unclear if and when
the framework will be finalized and whether it will be challenged in court. The uncertainty around this issue may further impact
our business operations in the EU.
Following Brexit, the UK Data Protection Act 2018 applies to the processing of personal data that takes place in the United
Kingdom and includes parallel obligations to those set forth by GDPR. In relation to data transfers, both the United Kingdom
and the EU have determined, through separate “adequacy” decisions, that data transfers between the two jurisdictions are in
compliance with the UK Data Protection Act and the GDPR, respectively. Any changes or updates to these adequacy decisions
have the potential to impact our business.
Beyond GDPR, there are privacy and data security laws in a growing number of countries around the world. While many
loosely follow GDPR as a model, other laws contain different or conflicting provisions. These laws will impact our ability to
conduct our business activities, including both our clinical trials and the sale and distribution of commercial products, through
increased compliance costs, costs associated with contracting and potential enforcement actions.
While we continue to address the implications of the recent changes to data privacy regulations, data privacy remains an
evolving landscape at both the domestic and international level, with new regulations coming into effect and continued legal
challenges, and our efforts to comply with the evolving data protection rules may be unsuccessful. It is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our practices. We must devote significant resources to
understanding and complying with this changing landscape. Failure to comply with laws regarding data protection would
expose us to risk of enforcement actions taken by data protection authorities in the EEA and elsewhere and carries with it the
potential for significant penalties if we are found to be non-compliant. Similarly, failure to comply with federal and state laws
in the United States regarding privacy and security of personal information could expose us to penalties under such laws. Any
such failure to comply with data protection and privacy laws could result in government-imposed fines or orders requiring that
we change our practices, claims for damages or other liabilities, regulatory investigations and enforcement action, litigation and
significant costs for remediation, any of which could adversely affect our business. Even if we are not determined to have
violated these laws, government investigations into these issues typically require the expenditure of significant resources and
generate negative publicity, which could harm our business, financial condition, results of operations or prospects.
Risks Related to Our Financial Position
We face new challenges as a smaller, less diversified company following the sale of our oncology business to Servier.
Following the sale of our oncology business to Servier in March 2021, we have focused our resources and efforts on product
and product candidates for the treatment of rare diseases. The success of the rare disease business is subject to various risks and
uncertainties, including the possibility that we may not be able to successfully commercialize PYRUKYND®, the possibility of
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adverse clinical and other developments in respect of PYRUKYND® or our other product candidates of the rare disease
business, and unanticipated changes in applicable laws and regulations that may adversely affect the rare disease business.
We developed most of our initial products and product candidates for the treatment of various types of cancer. The sale of our
oncology business to Servier, including our approved products at the time of sale, TIBSOVO® and IDHIFA®, has resulted in
us being a smaller, less diversified company with a more limited business concentrated on products and product candidates for
the treatment of rare diseases. As a result, we may be more susceptible to changing market conditions, including fluctuations
and risks particular to the markets for patients with rare diseases, than a more diversified company, which could adversely
affect our business, financial condition and results of operations. In addition, even with the FDA approval of PYRUKYND®,
the diversification of our revenues, costs and cash flows has diminished following the sale of our oncology business. Our results
of operations, cash flows, working capital and financing requirements may be subject to increased volatility and our ability to
fund capital expenditures and investments or satisfy other financial commitments may be diminished.
Raising additional capital may restrict our operations, require us to relinquish rights to our technologies or product
candidates or cause dilution to our stockholders.
Until such time, if ever, as we can generate substantial product revenue, including from sales of PYRUKYND®, we expect to
finance our cash needs primarily through cash on hand, a potential milestone payment and royalties 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 with respect to vorasidenib under our purchase agreement with
Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership
interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that
adversely affect the rights of our common stockholders. Debt financing, if available, may require us to enter into agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. In addition, securing financing could require a substantial amount of time and
attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities,
which may adversely affect our management’s ability to oversee the development of our product candidates.
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 to grant
licenses on terms that may not be favorable to us.
If our existing capital is insufficient to execute our operating plan through significant catalysts and to cash-flow positivity,
we will need to raise capital, and if we are unable to raise capital when needed, we would be forced to delay, reduce or
eliminate our product development programs or commercialization efforts.
We expect to incur significant expenses as we continue to advance our ongoing activities. We expect to execute our operating
plan through significant catalysts and to cash-flow positivity without the need to raise additional equity. Our estimate as to
when we will achieve cash-flow positivity and how long we expect our existing cash, cash equivalents, and marketable
securities to be available to fund our operating plan 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, and we may need to seek
additional funds. Our future capital requirements will depend on many factors, including:
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the amount and timing of future revenue received from commercial sales of PYRUKYND® and any of our other
product candidates for which we may receive marketing approval;
the amount of contingent consideration we ultimately receive from Servier;
the costs and timing of our ongoing commercialization activities, including product manufacturing, sales, marketing
and distribution, for PYRUKYND® for the treatment of adults with PK deficiency in the approved jurisdictions;
the anticipated cost-savings associated with the evolution of our research organization;
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product
candidates;
the costs associated with in-licensing or acquiring assets for pipeline growth;
the costs, timing and outcome of regulatory review of our product candidates;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending intellectual property-related claims;
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the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and
distribution, for any of our product candidates for which we may receive marketing approval;
our ability to establish and maintain collaborations on favorable terms, if at all;
our ability to successfully execute on our strategic plans;
operational delays due to the COVID-19 pandemic; and
operational delays, disruptions and/or increased costs associated with rising global energy prices or energy shortages
or rationing.
We have historically incurred operating losses. We expect to incur losses in the future and may never achieve or maintain
profitability.
We have a history of incurring operating losses. Our net loss for the twelve months ended December 31, 2022 was $231.8
million, our net income for the twelve months ended December 31, 2021 was $1.6 billion, and our net loss for the twelve
months ended December 31, 2020 was $327.4 million. The net income for the twelve months ended December 31, 2021 was
due to the sale of our oncology business to Servier on March 31, 2021. As of December 31, 2022, we had an accumulated
deficit of $470.6 million. Prior to the sale of our oncology business to Servier, we had generated only modest revenue from
sales of TIBSOVO® and, prior to our sale to Royalty Pharma of our royalty rights to IDHIFA®, from royalties on sales of
IDHIFA®. Following receipt of marketing approval in February 2022, we have begun to commercialize PYRUKYND® for the
treatment of hemolytic anemia in adults with PK deficiency in the United States, and we only recently obtained marketing
authorization of PYRUKYND® for the treatment of adults with PK deficiency in the European Union and Great Britain and are
currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great Britain through a global
managed access program. PYRUKYND® is the first product we have received marketing approval for following the sale of our
oncology business, including approved products TIBSOVO® and IDHIFA®, to Servier in March 2021. We have neither
obtained marketing approval for PYRUKYND® in any other indications nor have we obtained marketing approval for any of
our other product candidates, all of which are in preclinical or clinical development stages.
Prior to the sale of our oncology business to Servier, we financed our operations primarily through public offerings of our
common stock and our collaboration agreements with Celgene and have devoted substantially all of our efforts to research and
development. Following the sale of our oncology business to Servier on March 31, 2021, we have financed and expect to
continue to finance our operations primarily through cash on hand, royalty payments from Servier with respect to U.S. net sales
of TIBSOVO® prior to the sale of these royalty rights to Sagard, proceeds from the sale of our rights to the royalty on U.S. net
sales of TIBSOVO® to Sagard, a potential milestone payment and royalties from Servier if vorasidenib is approved by the
FDA, the actual and potential future sales of PYRUKYND® and, potentially, collaborations, strategic alliances, licensing
arrangements and other nondilutive strategic transactions. We expect to continue to incur significant expenses and net losses
until such time as we are able to report profitable results. The net losses we incur may fluctuate significantly from quarter to
quarter. We anticipate that we will incur significant expenses if and as we:
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commercially launch PYRUKYND® for approved indications in approved jurisdictions;
continue to establish and maintain a sales, marketing and distribution infrastructure to commercialize PYRUKYND®
and other product candidates for which we may obtain marketing approval;
initiate and continue clinical trials for our products and product candidates, including PYRUKYND® in other
indications;
continue our research and preclinical development of our product candidates and seek to identify additional product
candidates;
seek marketing approvals for our product candidates that successfully complete clinical trials;
require the manufacture of larger quantities of product candidates for clinical development and commercialization;
• maintain, expand and protect our intellectual property portfolio;
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add additional personnel to support our product research and development and planned future commercialization
efforts and our operations;
add equipment and physical infrastructure to support our research and development; and
acquire or in-license other product candidates, medicines and technologies.
To become and remain profitable, we must develop and successfully commercialize medicines with significant market
potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and
clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing
and selling those medicines for which we may obtain marketing approval and satisfying any post-marketing requirements. If we
do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to
become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain
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our research and development efforts, expand our business or continue our operations. A decline in the value of our company
could also cause our stockholders to lose all or part of their investment.
The amount of contingent consideration we will receive from the sale of our oncology business to Servier is subject to
various risks and uncertainties.
Upon closing of the sale of our oncology business to Servier, Servier assumed certain liabilities with respect to the oncology
business and paid to us: approximately $1.8 billion in cash, net of certain adjustments for the working capital of the oncology
business at the time of closing of the transaction and amounts for a representation and warranty insurance policy. In addition,
Servier agreed to pay to us:
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$200.0 million in cash if, prior to January 1, 2027, vorasidenib is granted approval for a new drug application, or
NDA, from the FDA with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment
of patients with Grade 2 glioma that have an IDH1 or IDH2 mutation (and, to the extent required by such approval, the
vorasidenib companion diagnostic test is granted an FDA premarket approval);
a royalty payment of 5% of the U.S. net sales (as defined in the purchase agreement with Servier) of TIBSOVO® from
the completion of the transaction through loss of exclusivity of TIBSOVO®, which we sold to Sagard in October
2022; and
a royalty payment of 15% of the U.S. net sales (as defined in the purchase agreement with Servier) of vorasidenib from
its first commercial sale through loss of exclusivity of vorasidenib.
The contingent consideration described above is subject to various risks and uncertainties.
Whether the regulatory approval milestone will be achieved prior to January 1, 2027 is subject to various risks and
uncertainties, which are outside of our control, including adverse clinical developments with respect to vorasidenib.
Although to date, prior to the sale to Sagard, we have received royalties from Servier on U.S. net sales of TIBSOVO®, we
cannot predict what success, if any, Servier may have in the United States with respect to future sales of vorasidenib, if
approved, and, therefore, we cannot predict the amount of royalty payments that we can expect to receive from Servier under
the terms of the purchase agreement prior to the loss of exclusivity of vorasidenib. The potential royalty payments with respect
to vorasidenib are also subject to deductions and other adjustments under the terms of the purchase agreement, the amounts of
which are uncertain as of the date of this report.
Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.
Changes in tax law may adversely affect our business or financial condition. On December 22, 2017, the U.S. government
enacted the Tax Cuts and Jobs Act, or the Tax Act, which significantly reformed the U.S. Internal Revenue Code of 1986, as
amended, or the Code. The Tax Act, among other things, contained significant changes to corporate taxation.
As part of Congress’ response to the COVID-19 pandemic, economic relief legislation was enacted in 2020 and 2021. Such
legislation contains numerous tax provisions. In addition, the Inflation Reduction Act, or IRA, was signed into law in August
2022. The IRA introduced new tax provisions, including a 1% excise tax imposed on certain stock repurchases by publicly
traded corporations. The 1% excise tax generally applies to any acquisition by the publicly traded corporation (or certain of its
affiliates) of stock of the publicly traded corporation in exchange for money or other property (other than stock of the
corporation itself), subject to a de minimis exception. Thus, the excise tax could apply to certain transactions that are not
traditional stock repurchases. Regulatory guidance under the IRA, the Tax Act, and such additional legislation is and continues
to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial
condition. In addition, it is uncertain if and to what extent various states will conform to the IRA, the Tax Act, and additional
tax legislation.
Risks Related to Our Dependence on Third Parties
We rely and expect to continue to rely on third parties to conduct our clinical trials and some aspects of our research and
preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the
completion of such trials, research or testing.
We do not independently conduct clinical trials of any of our product candidates. We rely and expect to continue to rely on
third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct
our clinical trials. In addition, we currently rely and expect to continue to rely on third parties to conduct some aspects of our
research and preclinical testing. Any of these third parties may terminate their engagements with us, some in the event of an
uncured material breach and some at any time. If any of our relationships with these third parties terminate, we may not be able
to enter into similar arrangements with alternative third-parties or to do so on commercially reasonable terms. Switching or
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adding additional third parties involves additional cost and requires management time and focus. As a result, delays may occur
in our product development activities. Although we seek to carefully manage our relationships with our CROs, we could
encounter such challenges or delays that could have a material adverse impact on our business, financial condition and
prospects.
Our reliance on third parties for research and development activities reduces our control over these activities but does not
relieve us of our responsibilities. For example, we are responsible for ensuring that each of our studies is conducted in
accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on third parties does not
relieve us of our responsibility to comply with any such standards. We and these third parties are required to comply with
current good clinical practices, or cGCP, which are regulations and guidelines enforced by the FDA, the Competent Authorities
of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of our product
candidates in clinical development. Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors,
principal investigators and trial sites. If we or any of these third parties fail to comply with applicable cGCPs, the clinical data
generated in our clinical trials may be deemed unreliable and the FDA, the EMA, or comparable foreign regulatory authorities
may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you a given
regulatory authority will determine that any of our clinical trials comply with cGCP regulations. We also are required to register
trials on a U.S. government-sponsored database,
ongoing clinical
clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal
sanctions. We are exposed to risk of fraud or other misconduct by such third parties.
the results of completed clinical
trials and post
Furthermore, third parties on whom we rely may also have relationships with other entities, some of which may be our
competitors. In addition, these third parties are not our employees, and except for remedies available to us under our agreements
with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-going clinical,
nonclinical and preclinical programs.
If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need
to be replaced or if the quality or accuracy of the clinical data they obtain is compromised, our clinical trials may be extended,
delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product
candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.
If either we or any third parties on which we rely are adversely impacted by rising global energy costs or energy shortages or
rationing, delays may occur in our product development activities, which delays could have a material adverse impact on our
business, financial condition and prospects.
We also rely and expect to continue to rely on other third parties to store and distribute drug supplies for our clinical trials. Any
performance failure on the part of our distributors could delay clinical development or marketing approval of our product
candidates or commercialization of our medicines, producing additional losses and depriving us of potential product revenue.
We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and for
commercialization.
We do not have any manufacturing or supply chain related facilities. We currently rely, and expect to continue to rely, on third-
party manufacturers for the materials and manufacture of our product candidates for preclinical and clinical testing and for
commercial supply of PYRUKYND® and any product candidate for which we obtain marketing approval.
Although we have entered into long-term supply agreements for commercial supply of PYRUKYND® with third-party
manufacturers, we may be unable to establish similar long-term supply agreements with third-party manufacturers with respect
to our other product candidates or to do so on acceptable terms. Even if we are able to establish agreements with third-party
manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance on the third party for
pharmacovigilance reporting;
regulatory compliance, quality assurance, environmental and safety and
the possible breach of the manufacturing agreement by the third party; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for
us.
Third-party manufacturers may not be able to comply with cGMPs, regulations or similar regulatory requirements on a global
basis. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions
being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license
revocation, seizures or recalls of product candidates or medicines, operating restrictions and criminal prosecutions, any of
which could significantly and adversely affect supplies of our medicines and harm our business and results of operations.
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We have been monitoring our supply chain network for any disruptions due to the COVID-19 pandemic, and our
manufacturers, other than certain CROs based in China, have remained 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 yet experienced a supply impact. If either we or any third parties on which we rely are adversely
impacted by restrictions resulting from the COVID-19 pandemic, the emergence of another pandemic and/or by rising global
energy costs or energy shortages or rationing, our supply chain may be disrupted, limiting our ability to manufacture our
product candidates for our clinical trials and research and development operations and our product for commercialization.
Any performance failure on the part of our existing or future manufacturers could delay preclinical development, clinical
development, marketing approval or our commercialization efforts. Due to the volatility of the supply networks globally, we
have obtained regulatory approval for redundant supply of raw materials and API for PYRUKYND®, and have an ongoing
program to monitor supply, including establishing safety stocks. While we maintain a broad safety stock of drug product, we do
not currently have arrangements in place for redundant supply for drug product. If any one of our current contract
manufacturers cannot perform as agreed, we may be required to replace that manufacturer. Although we believe that there are
several potential alternative manufacturers who could manufacture our product or our product candidates, we may incur added
costs and delays in identifying and qualifying any such replacement.
Our current and anticipated future dependence upon others for the manufacture of our product candidates or medicines may
adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a
timely and competitive basis.
We may depend on collaborations with third parties for the development and commercialization of our product candidates.
If those collaborations are not successful, we may not be able to capitalize on the market potential of these product
candidates.
We may seek collaborations for the development and commercialization of our product candidates with large and mid-size
pharmaceutical companies and biotechnology companies. We face significant competition in seeking appropriate collaborators.
Collaborations are complex and time-consuming to negotiate and document. Whether we reach a definitive agreement for a
collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and
conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. We may not be able
to negotiate collaborations on a timely basis, on acceptable terms, or at all. Collaborators may have rights that restrict us from
entering into future agreements on certain terms with potential collaborators.
If we enter into any such arrangements with collaborators, we will likely have limited control over the amount and timing of
resources that our collaborators dedicate to the development or commercialization of our product candidates. Collaborators may
not pursue development and commercialization of our product candidates or may elect not to continue or renew development or
commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or
external factors such as an acquisition that diverts resources or creates competing priorities. Collaborators may delay clinical
trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or
conduct new clinical trials or require a new formulation of a product candidate for clinical testing, which may result in a need
for additional capital to pursue further development or commercialization of the applicable product candidate. Collaborators
may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to
invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation. Disputes may
arise between the collaborators and us that result in the delay or termination of the research, development or commercialization
of our medicines or product candidates or that result in costly litigation or arbitration that diverts management attention and
resources.
Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the
functions assigned to them in these arrangements.
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Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent or trade secret protection for our medicines and technology, or if the scope of
the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize medicines and
technology similar or identical to ours, and our ability to successfully commercialize our medicines and technology may be
adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries
with respect to our proprietary medicines and technology. We seek to protect our proprietary position by filing patent
applications in the United States and abroad related to our novel technologies and medicines that are important to our business.
We do not yet have issued patents for all our most advanced product candidates in all markets in which we intend to
commercialize but we continue to actively pursue patent protection for our assets around the world.
The patent prosecution process is costly and time-consuming, and we may not be able to file and prosecute all necessary or
desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify and/or file
patent applications on every aspect of our research and development output that is or may be eligible for patent protection.
Although we enter into non-disclosure and confidentiality agreements with parties who may have access to patentable aspects
of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators,
contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may
breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek
patent protection. There is also the possibility that loss or theft of data or records may jeopardize the ability to seek patent
protection or impede the progress or drafting of patent applications.
We have licensed patent rights, and in the future may license additional patent rights, from third parties. Such licenses may be
accompanied by milestone and/or royalty payment obligations. These licensed patent rights may be valuable to our business,
and we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the
patents, covering technology or medicines underlying such licenses. We cannot be certain that these patents and applications
will be prosecuted and enforced in a manner consistent with the best interests of our business. If any such licensors fail to
maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated and our right to
develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected. In
addition to the foregoing, the risks associated with patent rights that we license from third parties also apply to patent rights we
own.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and
factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity,
enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may
not result
in patents being issued that protect our technology or medicines or that effectively prevent others from
commercializing competitive technologies and medicines. Changes in either the patent laws or interpretation of the patent laws
in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The
laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of
discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and
other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore we cannot be
certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or
that we were the first to file for patent protection of such inventions.
Assuming the other requirements for patentability are met, prior to March 2013, in the United States, the first to make the
claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to
the patent. Beginning in March 2013, the United States transitioned to a first inventor to file system in which, assuming the
other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent. We may
be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become
involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review or interference proceedings
challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or
litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or
products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize
medicines without infringing third-party patent rights.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive
advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative
technologies or products in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be
challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of the patent or in
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one or more patent claims being narrowed or invalidated, which could limit our ability to stop others from using or
commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology
and medicines. Given the significant amount of time required for the discovery, development, preclinical and clinical testing
and regulatory review and approval of new product candidates, patents protecting such candidates might expire before or
shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights
to exclude others from commercializing products similar or identical to ours. In such circumstances we would be relying
primarily on regulatory or marketing exclusivity to exclude others from commercializing a generic version of our products.
We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be
expensive, time consuming and unsuccessful.
Competitors may infringe our patents and other intellectual property rights. To counter infringement or unauthorized use, we
may be required to file infringement claims, which can be expensive and time consuming. In addition, in an infringement
proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using
the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any
litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation.
Third parties may initiate legal proceedings alleging that we or our collaborators are infringing their intellectual property
rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
The biotechnology and pharmaceutical
industries are characterized by extensive litigation regarding patents and other
intellectual property rights. Our commercial success depends upon our ability and the ability of our collaborators to develop,
manufacture, market and sell our product and product candidates and use our proprietary technologies without infringing the
proprietary rights and intellectual property of third parties. We have in the past and may in the future become party to, or
threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our medicines and
technology, including opposition, derivation, revocation, reexamination, post-grant and inter partes review or interference
proceedings before the USPTO or other patent offices around the world. For example, in 2011, The Leonard and Madlyn
Abramson Family Cancer Research Institute at the Abramson Cancer Center of the University of Pennsylvania initiated a
lawsuit against us, one of our founders, Craig B. Thompson, M.D., and Celgene, alleging misappropriation of intellectual
property and, in 2012, the Trustees of the University of Pennsylvania initiated a similar lawsuit against us and Dr. Thompson.
Each of these lawsuits was settled in 2012. We are not aware of any other legal proceedings having been filed against us to date.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If
we or one of our collaborators are found to infringe a third party’s intellectual property rights, we or they could be required to
obtain a license from such third party to continue developing and marketing our medicines and technology. However, we or our
collaborators may not be able to obtain any required license on commercially reasonable terms or at all. Even if we or our
collaborators were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties
access to the same technologies licensed to us. We or our collaborators could be forced, including by court order, to cease
developing and commercializing the infringing technology or medicine. In addition, we or our collaborators could be found
liable for monetary damages. A finding of infringement could prevent us or our collaborators from commercializing our product
and product candidates or force us to cease some of our business operations, which could materially harm our business. Claims
that we or our collaborators have misappropriated the confidential information or trade secrets of third parties could have a
similar negative impact on our business.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former
employers.
Many of our employees, consultants or advisors are currently or were previously employed at universities or other
biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that
our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we
may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or
other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend
against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable
47
intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in
substantial costs and be a distraction to our organization.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal
responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if
securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources
available for development activities or any future sales, marketing or distribution activities. We may not have sufficient
financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and
more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
If we are unable to protect the confidentiality of our confidential information related to our proprietary platforms and
technology, our business and competitive position could be harmed.
In addition to seeking patents for some of our technology and medicines, we also rely on maintaining the confidentiality of
unpatented know-how, technology and other proprietary information, to maintain our competitive position. For example, we
consider the confidential information and know-how related to our cellular metabolism technology platform to be our primary
intellectual property assets in this space. Unpatented proprietary technical information and know-how can be difficult to protect.
We seek to protect this proprietary technical information and know-how, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside
scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties.
We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite
these efforts, any of these parties may breach the agreements and disclose our proprietary information, and we may not be able
to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated proprietary
information is difficult, expensive and time-consuming, and the outcome is unpredictable. If any of our proprietary technical
information and know-how were to be lawfully obtained or independently developed by a competitor or other third party, we
would have no right to prevent them from using that technology or information to compete with us. Moreover, we anticipate
that with respect to this platform, at least some of this technical information and know-how will, over time, be disseminated
within the industry through independent development, the publication of journal articles describing the methodology, and the
movement of personnel skilled in the art from academic to industry scientific positions.
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
Even if we complete necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-
consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our
product candidates. If we or our collaborators are not able to obtain, or if there are delays in obtaining, required regulatory
approvals, we or they will not be able to commercialize, or will be delayed in commercializing, our product candidates, and
our ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design,
testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale and distribution,
export and import, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and
by the EMA and comparable regulatory authorities in other countries.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to
the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy.
Securing regulatory approval also requires the submission of information about the product manufacturing process to, and
inspection of manufacturing facilities by, the relevant regulatory authority. Our product candidates may not be effective, may be
only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that
may preclude our obtaining marketing approval or prevent or limit commercial use.
The FDA, EMA and other foreign regulatory authorities have substantial discretion in the approval process. Accordingly, it is
possible that the FDA or EMA may refuse to accept for substantive review any NDA, sNDA or MAA that we submit for our
product candidates, or may conclude after review of our data that our marketing application is insufficient to obtain marketing
approval of our product candidates. If the FDA or EMA does not accept or approve our applications for any of our product
candidates, the applicable regulator may require that we conduct additional clinical trials, preclinical studies or manufacturing
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validation studies and submit that data before reconsidering our applications. Depending on the extent of these or any other
FDA- or EMA-required trials or studies, approval of any marketing applications that we submit may be delayed by several
years, or may require us to expend more resources than we planned. It is also possible that additional trials or studies, if
performed and completed, may not be considered sufficient by the FDA or EMA to approve any marketing applications. We
may not be successful in obtaining FDA or EMA approval of our product candidates on a timely basis, or ever. We have limited
experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party
contract research organizations to assist us in this process, and failure to obtain marketing approval for our product candidates
will prevent us from commercializing the product candidate in the applicable jurisdictions.
Further, the process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years
if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors,
including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during
the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for
each submitted product application, may cause delays in the approval or rejection of an application. In addition, varying
interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a
product candidate. Any marketing approval we or our collaborators ultimately obtain may be limited or subject to restrictions or
post-approval commitments that render the approved medicine not commercially viable.
In addition, the COVID-19 pandemic may continue to disrupt the U.S. and international healthcare and regulatory systems.
These disruptions could materially delay the review of, and/or decision making with respect to, marketing approvals for our
product candidates. Any delay in regulatory review or decision making resulting from such disruptions could materially affect
the development of our product candidates.
Disruptions at the FDA and other agencies may prolong the time necessary for regulatory submissions to be reviewed and/or
new drugs to be approved by necessary government agencies, which would adversely affect our business. For example, over the
last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had
to furlough critical employees and stop critical activities. If a prolonged government shutdown were to occur, it could
significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a
material adverse effect on our business. Should the FDA determine that an inspection is necessary for approval of a regulatory
submission and an inspection cannot be completed during the review cycle due to restrictions on travel due to COVID-19, and
the FDA does not determine a remote interactive evaluation to be adequate, the FDA has stated that it generally intends to issue
a complete response letter or defer action on the regulatory submission until an inspection can be completed.
If we or our collaborators experience delays in obtaining approval or if we or they fail to obtain approval of our product
candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenue will be
materially impaired.
Failure to obtain marketing approval in foreign jurisdictions would prevent our medicines from being marketed in such
jurisdictions and any of our medicines that are approved for marketing in such jurisdiction will be subject to risk associated
with foreign operations.
In order to market and sell our medicines in the EU and many other foreign jurisdictions, we or our collaborators must obtain
separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies
among countries and can involve additional testing. The time required to obtain approval may differ substantially from that
required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks
associated with obtaining FDA approval. In addition, in many countries outside the United States, a product must be approved
for reimbursement before the product can be approved for sale in that country. We or our collaborators may not obtain
approvals from regulatory authorities outside the United States on a timely basis, if at all. Moreover, approval by the FDA does
not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority
outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.
Although we have received marketing authorization for PYRUKYND® for the treatment of adults with PK deficiency in the
European Union and Great Britain, we may not be able to file for additional marketing approvals and may not receive necessary
approvals to commercialize our medicines in any other foreign market.
Additionally, we could face heightened risks with respect to seeking marketing approval in the United Kingdom as a result of
the withdrawal of the United Kingdom from the EU on December 31, 2020, commonly referred to as Brexit. Since the
regulatory framework for pharmaceutical products in the United Kingdom covering the quality, safety, and efficacy of
pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products
is derived from EU directives and regulations, the consequences of Brexit and the impact on the future regulatory regime that
applies to products and the approval of product candidates in the United Kingdom remains unclear. As of January 1, 2021, the
Medicines and Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and
medical devices in Great Britain, comprising England, Scotland and Wales under domestic law, whereas Northern Ireland will
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continue to be subject to European Union rules under the Northern Ireland Protocol. The MHRA will rely on the Human
Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines. The HMR has
incorporated into the domestic law the body of European Union law instruments governing medicinal products that pre-existed
Brexit. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may
prevent us from commercializing any product candidates in the United Kingdom and/or the EU and may force us to restrict or
delay efforts to seek regulatory approval in the United Kingdom, which could significantly and materially harm our business.
We expect that we will be subject to additional risks in commercializing any of our product candidates that receive marketing
approval outside the United States, including tariffs, trade barriers and regulatory requirements; economic weakness, including
inflation, or political instability in particular foreign economies and markets; compliance with tax, employment, immigration
and labor laws for employees living or traveling abroad; foreign currency fluctuations, which could result in increased operating
expenses and reduced revenue, and other obligations incident to doing business in another country; and workforce uncertainty
is more common than in the United States. In addition, we do not have experience
in countries where labor unrest
commercializing products outside of the United States and such efforts may depend on our ability to find a suitable
collaborator.
Fast track designation and/or priority review designation by the FDA or PRIME designation in the EU may not actually
lead to a faster development or regulatory review or approval process, nor does it assure approval of the product candidate
by the FDA or the EMA.
We may seek fast track designation, priority review designation and/or PRIME designation for our product candidates.
If a product candidate is intended for the treatment of a serious or life-threatening disease or condition and the product
candidate demonstrates the potential to address unmet medical needs for this disease or condition, the drug sponsor may apply
for FDA fast track designation.
Further, if the FDA determines that a product candidate offers major advances in treatment or provides a treatment where no
adequate therapy exists, the FDA may designate the product candidate for priority review. A priority review designation means
that the goal for the FDA to review an application is six months, rather than the standard review period of ten months.
Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or thereafter.
The FDA has broad discretion on whether to grant fast track designation and/or priority review designation to a product
candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide
not to grant it. Even if our product candidates receive fast track designation and/or priority review designation, we may not
experience a faster development process, review or approval, if at all, compared to conventional FDA procedures. The FDA
may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical
development program.
In addition, in the EU, the PRIME designation program focuses on product candidates that target conditions for which there
exists no satisfactory method of treatment in the EU or product candidates that may offer a major therapeutic advantage over
existing treatments. The benefits of a PRIME designation include, among other things, the potential to qualify product for
accelerated review, meaning reduction in the review time for an opinion on approvability to be issued earlier in the application
process. PRIME designation enables a sponsor to request parallel EMA scientific advice and health technology assessment
advice to facilitate timely market access. Even if our product candidates receive PRIME designation, we may not experience a
faster development process, review or approval compared to conventional EMA procedures and it does not assure or increase
the likelihood of the EMA’s grant of a marketing authorization.
We, or any collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our drug
candidates and, even if we do, that exclusivity may not prevent the FDA or the EMA from approving competing drugs.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs and biologics for
relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an
orphan drug if it is a drug or biologic intended to treat a rare disease or condition, which is generally defined as a patient
population of fewer than 200,000 individuals annually in the United States.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for
which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA
from approving another marketing application for the same product for that time period. The applicable period is seven years in
the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer
meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer
justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially
defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare
disease or condition. Moreover, even after an orphan drug is approved, the FDA can subsequently approve a different product
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for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more
effective or makes a major contribution to patient care.
In addition, even after an orphan drug is approved, the FDA can subsequently approve a different product for the same
condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effective or
makes a major contribution to patient care. The FDA and Congress may reevaluate the Orphan Drug Act and its regulations and
policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is
uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug
regulations and policies, our business could be adversely impacted.
Any product or product candidate for which we or our collaborators obtain marketing approval could be subject to
restrictions or withdrawal from the market and we may be subject to substantial penalties if we fail to comply with regulatory
requirements or if we experience unanticipated problems with our medicines, when and if any of them are approved.
Any product or product candidate for which we or our collaborators obtain marketing approval, along with the manufacturing
processes, post-approval clinical data, labeling, advertising and promotional activities for such medicine, will be subject to
continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of
safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to
quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and
requirements regarding the distribution of samples to physicians and record keeping. Even if marketing approval of a product
candidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may be marketed
or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety
or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy.
The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval
marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in
accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’
communications regarding off-label use and if we market our medicines for uses other than their respective approved
indications, we may be subject to enforcement action for off-label marketing. Violations of the FDCA and other statutes,
including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and
enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer
protection laws, which violations may result in the imposition of significant administrative, civil and criminal penalties.
Our relationships with healthcare providers, physicians and third-party payors are subject to applicable anti-kickback, fraud
and abuse and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of
PYRUKYND® and any product candidates for which we obtain marketing approval. Our future arrangements with healthcare
providers, physicians and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we market, sell and
distribute PYRUKYND® and any other medicines for which we obtain marketing approval. Restrictions under applicable
federal and state healthcare laws and regulations include the following:
•
•
•
•
•
the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return
for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or
service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam
actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false
or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to
payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government,
with potential liability including mandatory treble damages and significant per-claim penalties;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil
liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its
implementing regulations, also imposes obligations,
to
safeguarding the privacy, security and transmission of individually identifiable health information;
including mandatory contractual
terms, with respect
the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs to report payments
and other transfers of value to physicians and teaching hospitals and other covered recipients; and
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•
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency
statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed
by non-governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers
to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of
which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations
will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not
comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may
apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment,
exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or
restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do
business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement,
purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to
physicians is governed by the national anti-bribery laws of EU Member States, such as the U.K. Bribery Act 2010.
Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians
often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional
organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the
national laws, industry codes or professional codes of conduct, applicable in the EU Member States. Failure to comply with
these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
PYRUKYND® or any product candidate that we commercialize may become subject to unfavorable pricing regulations and
third-party reimbursement practices, which would harm our business.
We have built our commercial infrastructure to support the commercial launch of PYRUKYND® in adult PK deficiency in the
United States. We are providing access to PYRUKYND® free of charge for eligible patients in the EU and Great Britain
through a global managed access program. The commercial success of PYRUKYND® or of any of our product candidates will
depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by
third-party payors, including government health administration authorities and private health coverage insurers. If coverage and
reimbursement is not available, or reimbursement is available only to limited levels, we, or any collaborators, may not be able
to successfully commercialize PYRUKYND® or our product candidates. Even if coverage is provided,
the approved
reimbursement amount may not be high enough to allow us, or any future collaborators, to establish or maintain pricing
sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of coverage and
reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ
significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process
that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no
assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing
approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after
marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains
subject to continuing governmental control even after initial approval is granted. In these countries, pricing negotiations with
governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain
reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost
effectiveness of our product candidates to other available therapies. If reimbursement of our products is unavailable or limited
in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be
impaired.
As a result, we, or any collaborators, might obtain marketing approval for a product in a particular country, but then be subject
to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively
impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder
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our ability or the ability of any collaborators to recoup our or their investment in one or more product candidates, even if our
product candidates obtain marketing approval.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of
the costs associated with their treatment. Therefore, our ability, and the ability of any collaborators, to commercialize
PYRUKYND® or any of our product candidates will depend in part on the extent to which coverage and reimbursement for
these products and related treatments will be available from third-party payors. Third-party payors decide which medications
they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the
United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any collaborators
to sell PYRUKYND® or our product candidates profitably. These payors may not view our products, if any, as cost-effective,
and coverage and reimbursement may not be available to our customers, or those of any collaborators, or may not be sufficient
to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any
collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated
product revenue. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide
coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.
In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new
technologies and are challenging the prices charged. We cannot be sure that coverage will be available for PYRUKYND® or
any product candidate that we, or any collaborator, may commercialize and, if available, that the reimbursement rates will be
adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws
that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An
inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for
PYRUKYND® or any of our product candidates for which we, or any collaborator, may obtain marketing approval could
significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial
condition.
Current and future healthcare reform legislation may increase the difficulty and cost for us and any collaborators to obtain
reimbursement and commercialize our drug candidates.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed
changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or
regulate post-approval activities and affect our ability, or the ability of any collaborators, to profitably sell PYRUKYND® or
any other product for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare
reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward
pressure on the price that we, or any collaborators, may receive for any approved products. If reimbursement of our products is
unavailable or limited in scope, our business could be materially harmed.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Affordability Reconciliation Act, or collectively the ACA. In August 2011, the Budget Control Act of
2011, among other things, created measures for spending reductions by Congress. This legislation resulted in aggregate
reductions to Medicare payments to providers of up to 2% per fiscal year, which will remain in effect through 2031. However,
pursuant to the CARES Act and subsequent legislation, these Medicare sequester reductions were suspended through the end of
March 2022 and from April 2022 through June 2022, a 1% cut was in effect, with the full 2% cut having resumed thereafter.
The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased
the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws
may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for
any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product
candidate is prescribed or used.
Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional actions to
repeal and replace provisions of the law. For example, in 2017, Congress repealed the “individual mandate.” The repeal of this
provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. On
November 10, 2020, the Supreme Court heard oral arguments as to whether the individual mandate portion of the ACA is an
essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs
Act, the remaining provisions of the ACA are invalid as well. On February 10, 2021, the Biden Administration withdrew the
federal government’s support for overturning the ACA. On June 17, 2021, the Supreme Court struck down the lower court
rulings, finding that the plaintiffs did not have standing to challenge the ACA’s minimum essential coverage provision at issue
in the case.
The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including directing
federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the
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implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On January 28, 2021, however, President
Biden revoked these Orders and issued a new Executive Order which directs federal agencies to reconsider rules and other
policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access. This
Executive Order also directs the U.S. Department of Health and Human Services to create a special enrollment period for the
Health Insurance Marketplace in response to the COVID-19 pandemic. We cannot predict how federal agencies will respond to
such Executive Orders.
The prices of prescription pharmaceuticals in the United States and foreign jurisdictions are subject to considerable
legislative and executive actions and could impact the prices we obtain for our drug products, if and when approved, and/or
the sustainability of those prices.
The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.
To date, there have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal
legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between
pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and Medicaid. To those ends, President
Trump issued several executive orders intended to lower the costs of prescription products. Certain provisions of these orders
have been reflected in promulgated regulations, including an interim final rule implementing a most favored nation model for
prices, which would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid
in other economically advanced countries. Such final rule has been subject to a nationwide preliminary injunction, and, on
December 29, 2021, Centers for Medicare & Medicaid Services, or CMS, issued a final rule to rescind it. With the issuance of
this rule, CMS stated it will explore all options to incorporate value into payments for Medicare Part B drugs and improve
beneficiaries’ access to evidence-based care.
In addition, in October 2020, the United States Department of Health and Human Services, or HHS, and the FDA published a
final rule allowing states and other entities to develop a Section 804 Importation Program, or SIP, to import certain prescription
drugs from Canada into the United States. The final rule is currently the subject of ongoing litigation, but at least six states
(Vermont, Colorado, Florida, Maine, New Mexico and New Hampshire) have passed laws allowing for the importation of drugs
from Canada with the intent of developing SIPs for review and approval by the FDA. Further, on November 20, 2020, HHS
finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors
under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule went
into effect on January 1, 2023. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well
as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers,
the
implementation of which has been delayed until January 1, 2026, by the Infrastructure Investment and Jobs Act.
More recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law by President Biden. The
new legislation has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare
Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug
coverage. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare
(beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount
program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the Department of Health and
Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly
single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare
Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by
15 Medicare Part D drugs in 2027, 15 Medicare Part B or Part D drugs in 2028, and 20 Medicare Part B or Part D drugs in 2029
and beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been
licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.
Nonetheless, since CMS may establish a maximum price for these products in price negotiations, we would be fully at risk of
government action if our products are the subject of Medicare price negotiations. Moreover, given the risk that could be the
case, these provisions of the IRA may also further heighten the risk that we would not be able to achieve the expected return on
our drug products or full value of our patents protecting our products if prices are set after such products have been on the
market for nine years.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to
control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual
hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be
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included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our
products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform
measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for
healthcare products and services, which could result in reduced demand for our product or product candidates or additional
pricing pressures.
In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our
product candidates, if approved.
We are subject to U.S. and foreign export control, import, sanctions, anti-corruption and anti-money laundering laws with
respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our
business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S.
Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office
of Foreign Assets Control, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute
contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-
money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit
companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing,
promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private
sector. We may have direct or indirect interactions with officials and employees of government agencies or government-
affiliated hospitals, universities, and other organizations. In addition, we may engage third party intermediaries to promote our
clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We can be held
liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors,
partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
investigations, sanctions, settlements,
Noncompliance with such laws could subject us to whistleblower complaints,
prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or
injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm,
adverse media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are
launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our
business, results of operations and financial condition could be materially harmed. In addition, responding to any action will
likely result in a materially significant diversion of management’s attention and resources and significant defense and
compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an
independent compliance monitor which can result in added costs and administrative burdens.
With the passage of the CREATES Act, we are exposed to possible litigation and damages by competitors who may claim
that we are not providing sufficient quantities of our approved products on commercially reasonable, market-based terms for
testing in support of their ANDAs and 505(b)(2) applications.
In December 2019, former President Trump signed legislation intended to facilitate the development of generic and biosimilar
products. The bill, previously known as the CREATES Act, authorizes sponsors of ANDAs and 505(b)(2) applications to file
lawsuits against companies holding NDAs that decline to provide sufficient quantities of an approved reference drug on
commercially reasonable, market-based terms. Drug products on FDA’s drug shortage list are exempt from these new
provisions unless the product has been on the list for more than six continuous months or the FDA determines that the supply of
the product will help alleviate or prevent a shortage. For the purposes of the statute, the term “commercially reasonable, market-
based terms” is defined as (1) the nondiscriminatory price at or below the most recent wholesale acquisition cost for the
product, (2) a delivery schedule that meets the statutorily defined timetable, and (3) no additional conditions on the sale.
To bring an action under the statute, an ANDA or 505(b)(2) sponsor must take certain steps to request the reference product,
which, in the case of products covered by a Risk Evaluation and Mitigation Strategy with elements to assure safe use, include
obtaining authorization from the FDA for the acquisition of the reference product. If the sponsor does bring an action for failure
to provide a reference product, there are certain affirmative defenses available to the NDA holder, which must be shown by a
preponderance of evidence. If the sponsor prevails in litigation, it is entitled to a court order directing the NDA holder to
provide, without delay, sufficient quantities of the applicable product on commercially reasonable, market-based terms, plus
reasonable attorney fees and costs.
Additionally, the statutory provisions authorize a federal court to award the product developer an amount “sufficient to deter”
the NDA holder from refusing to provide sufficient product quantities on commercially reasonable, market-based terms if the
court finds, by a preponderance of the evidence, that the NDA holder did not have a legitimate business justification to delay
providing the product or failed to comply with the court’s order.
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Although we intend to comply fully with the terms of these new statutory provisions, we are still exposed to potential litigation
and damages by competitors who may claim that we are not providing sufficient quantities of our approved products on
commercially reasonable, market-based terms for testing in support of ANDAs and 505(b)(2) applications. Such litigation
would subject us to additional costs, damages and reputational harm, which could lead to lower revenues. The CREATES Act
may enable generic competition with PYRUKYND® and any of our product candidates, if approved, which could impact our
ability to maximize product revenue.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the
use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also
produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We
cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from
our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.
We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our
employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential
liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in
connection with our storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to
comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to retain our key executives and scientific leadership and to attract, retain and
motivate qualified personnel.
We are highly dependent on the principal members of our management and scientific teams, each of whom is employed “at
will,” meaning we or they may terminate the employment relationship at any time. We do not maintain “key person” insurance
for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of
our research, development and commercialization objectives. We cannot predict the likelihood, timing or effect of future
transitions among our executive leadership.
Recruiting and retaining qualified scientific, clinical, manufacturing, regulatory and sales and marketing personnel will also be
critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies and universities and research institutions for similar personnel.
Our consultants and advisors, including our scientific co-founders, who assist us in formulating our research and development
and commercialization strategy may be employed by employers other than us and may have commitments under consulting or
advisory contracts with other entities that may limit their availability to us. Furthermore, the ongoing COVID-19 pandemic and
our flexible workplace policy allowing employees to work from home may make it difficult for us to maintain our corporate
culture. Our recent initiative to reduce approximately 45 roles focused on exploratory research in connection with the evolution
of our research organization could harm our ability to attract and retain qualified scientific, clinical, manufacturing, sales and
marketing personnel who are critical to our business.
In the future we may experience growth in the number of our development, regulatory and sales and marketing personnel. To
manage any anticipated future growth, we must continue to implement and improve our managerial, operational and financial
systems, expand our facilities and continue to recruit and train additional qualified personnel. Any inability to manage growth
could delay the execution of our business plans or disrupt our operations.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures
to comply with FDA regulations or regulations in other jurisdictions, provide accurate information to the FDA or other
regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare
fraud and abuse laws and regulations, report financial information or data accurately, disclose unauthorized activities to us, or
comply with securities laws. Employee misconduct could also involve the improper use of information obtained in the course of
clinical trials or interactions with the FDA or other regulatory authorities, including for illegal insider trading activities, which
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could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and
Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and
prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our business and results of operations, including the imposition of
significant fines or other sanctions.
Risks Related to Our Common Stock and Other Matters
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be
beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current
management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in
control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium
for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our
common stock, thereby depressing the market price of our common stock. In addition, because our Board of Directors is
responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our
stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of
our Board of Directors. Among other things, these provisions:
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establish a classified board of directors such that not all members of the board are elected at one time;
allow the authorized number of our directors to be changed only by resolution of our Board of Directors;
limit the manner in which stockholders can remove directors from the board;
establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and
nominations to our Board of Directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our
stockholders by written consent;
limit who may call stockholder meetings;
authorize our Board of Directors to issue preferred stock without stockholder approval, which could be used to
institute a shareholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a
potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors;
and
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to
amend or repeal certain provisions of our charter or bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or
combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of
our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
The price of our common stock is likely to be volatile, which could result in substantial losses for purchasers of our common
stock.
The trading price of our common stock has been, and may continue to be, volatile and could be subject to wide fluctuations in
response to various factors, some of which are beyond our control. For example, since January 1, 2015 the closing price of our
common stock on the Nasdaq Global Select Market has ranged from $17.06 per share to $135.01 per share. The stock market in
general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. While the full extent of the economic impact and the duration
of the COVID-19 pandemic or recent increases in inflation rates (particularly as it relates to clinical- or manufacturing-related
costs) may be difficult to assess or predict, such impacts have already caused, and are likely to result in further, significant
disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms.
The market price for our common stock may be influenced by many factors, including:
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our success in launching and commercializing PYRUKYND®;
the decision to focus our efforts on our rare disease business following the sale of our oncology business to Servier;
the evolution of our research organization;
the impact of any repurchases by us of shares of common stock from our stockholders;
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announcements by us or our competitors of significant acquisitions, in-licensing arrangements, strategic partnerships,
joint ventures, collaborations or capital commitments;
the timing and results of clinical trials of product candidates, or our competitors’ product candidates;
regulatory actions with respect to our product or product candidates or our competitors’ products and product
candidates;
commencement or termination of collaborations for our development programs;
failure or discontinuation of any of our development programs;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our products, product candidates or development programs;
the results of our efforts to develop additional product candidates and products;
actual or anticipated changes in estimates as to financial results or development timelines;
announcement or expectation of additional financing efforts;
sales of our common stock by us, our insiders or other stockholders, including shares issuable upon exercise of
outstanding stock options and upon vesting of stock units under our stock incentive plans;
variations in our financial results or results of companies that are perceived to be similar to us;
changes in estimates, evaluations or recommendations by securities analysts, that cover our stock or the failure by one
or more securities analysts to continue to cover our stock;
changes in the structure of healthcare payment systems;
the societal and economic impact of public health epidemics, such as the ongoing COVID-19 pandemic and any
recession, depression or sustained market event resulting from the pandemic;
• market conditions in the pharmaceutical and biotechnology sectors;
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general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation often
has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to
defend such claims and divert managements' attention and resources, which could seriously harm our business, financial
condition, results of operations and prospects.
We also cannot guarantee that an active trading market for our shares will be sustained. An inactive trading market for our
common stock may impair our ability to raise capital to continue to fund our operations by selling shares and may impair our
ability to acquire other companies or technologies by using our shares as consideration.
Our financial condition and operating results also may fluctuate from quarter to quarter and year to year due to a variety of
factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual
periods as indications of future operating performance.
Our executive officers, directors and principal stockholders maintain the ability to significantly influence all matters
submitted to stockholders for approval.
As of December 31, 2022, our executive officers, directors and principal stockholders, in the aggregate, beneficially owned
shares representing a significant percentage of our capital stock. As a result, if these stockholders were to choose to act together,
they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management
and affairs. For example, these persons could significantly influence the election of directors and approval of any merger,
consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an
acquisition of our company on terms that other stockholders may desire.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Code and corresponding provisions of state law, if a company undergoes an “ownership change,”
generally defined as a greater than 50% change (by value) in its equity ownership by certain stockholders over a three-year
period, the company’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as
research tax credits) to offset its post-change taxable income may be limited. Our prior equity offerings and other changes in
our stock ownership, some of which are outside of our control, may have resulted or could in the future result in an ownership
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change. We completed a review of our changes in ownership through December 31, 2022, and determined that we did not have
a qualified ownership change since our last review as of December 31, 2021. Future ownership changes under Section 382 may
limit the amount of net operating loss and tax credit carryforwards that we could potentially utilize to reduce future tax
liabilities.
There is also a risk that due to regulatory changes, such as suspensions on the use of net operating losses, or other unforeseen
reasons, our existing net operating losses could expire or otherwise become unavailable to offset future income tax liabilities.
The Tax Act, as amended by the CARES Act, includes changes to U.S. federal tax rates and the rules governing net operating
loss carryforwards that may significantly impact our ability to utilize our net operating losses to offset taxable income in the
future. In addition, state net operating losses generated in one state cannot be used to offset income generated in another state.
For these reasons we may be unable to use a material portion of our net operating losses and other tax attributes.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
We are subject to taxation in numerous U.S. states and territories. As a result, our effective tax rate is derived from a
combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the
amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different from
previous periods or our current expectations due to numerous factors, including as a result of changes in the mix of our
profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure or sustain
acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these
factors may result in tax obligations in excess of amounts accrued in our financial statements.
We incur costs as a result of operating as a public company, and our management is required to devote substantial time to
compliance initiatives and corporate governance practices.
We have incurred and will continue to incur significant legal, accounting and other expenses as a public company. The
Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The
Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public
companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance
practices. Stockholder activism, the current political environment and the current high level of government intervention and
regulatory reform may lead to substantial new regulations. Our management and other personnel devote, and will need to
continue to devote, a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase
our legal and financial compliance costs and make some activities more time-consuming and costly.
There can be no assurance that we will repurchase shares of our common stock or that we will repurchase shares at
favorable prices.
On March 25, 2021, we announced that our Board of Directors authorized the Repurchase Program for the repurchase of up to
$1.2 billion of our outstanding shares of common stock. In April 2021, in connection with the Repurchase Program, we
repurchased from BMS 7.1 million shares of our common stock held by certain subsidiaries of BMS for an aggregate purchase
price of $344.5 million, or $48.38 per share. Further, in April 2021, in connection with the Repurchase Program, we entered
into a Rule 10b5-1 repurchase plan pursuant to which we repurchased approximately 9.1 million shares of common stock for
$458.0 million, or $50.35 per share, under the plan. In total, as of December 31, 2022, we repurchased 16.2 million shares of
common stock for $802.5 million under the Repurchase Program. In October 2021, we terminated our Rule 10b5-1 share
repurchase program and entered into a Rule 10b-18 repurchase plan that allows us to conduct open market repurchases over
time up to our remaining authorization. We have paused our share repurchases and for the foreseeable future, we expect that our
capital allocation will be prioritized towards opportunities to accelerate programs in our development pipeline and/or pursue
potential complementary business development opportunities.
The amount and timing of share repurchases, if any, are subject to capital availability, our cash balances and future capital
requirements and our determination that share repurchases are in the best interest of our stockholders and are in compliance
with all respective laws and our applicable agreements. A reduction in repurchases under, or the completion of, our Repurchase
Program could have a negative effect on our stock price. We can provide no assurance that we will repurchase shares at
favorable prices, if at all.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation,
if any, will be the sole source of gain for our stockholders.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if
any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will
be the sole source of gain for our stockholders for the foreseeable future.
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We currently lease approximately 146,000 square feet at 88 Sidney Street, 43,000 square feet at 64 Sidney Street, and 13,000
square feet at 38 Sidney Street, Cambridge, Massachusetts. All leases, as amended, expire on February 29, 2028. At the end of
the initial lease period, we have the option to extend the leases at all facilities for two consecutive five year periods at the fair
market rent at the time of the extension. In August 2021, we entered into a long-term sublease agreement for 13,000 square feet
of the office space at 38 Sidney Street, Cambridge, Massachusetts, with the term of the lease running through December 2024.
In April 2022, we entered into a long-term sublease agreement for 27,000 square feet of the office space at 64 Sidney Street,
Cambridge, Massachusetts, with the term of the lease running through April 2025.
We believe our existing facilities are adequate for our current needs and that additional space will be available in the future on
commercially reasonable terms as needed.
Item 3. Legal Proceedings
As of December 31, 2022, we were not a party to any material legal or arbitration proceedings. No governmental proceedings
are pending or, to our knowledge, contemplated against us. We are not a party to any material proceedings in which any
director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material
interest adverse to us or our subsidiaries.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock has been publicly traded on the Nasdaq Global Select Market under the symbol “AGIO” since July 24,
2013. Prior to that time, there was no public market for our common stock.
Holders
As of February 17, 2023, there were approximately 9 holders of record of our common stock. This number does not include
beneficial owners whose shares are held by nominees in street name.
Dividends
We have not declared or paid any cash dividends on our capital stock since our inception. We intend to retain future earnings, if
any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends to holders of
common stock in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Item 12, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters, of this Annual Report on Form 10-K.
Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with
the Securities and Exchange Commission, or SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, nor shall such information be
incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, or the
Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
The following graph compares the performance of our common stock to the NASDAQ Composite Index and the NASDAQ
Biotechnology Index from December 31, 2017 through December 31, 2022. The comparison assumes $100 was invested after
the market closed on December 31, 2017 in our common stock and in each of the foregoing indices, and it assumes
reinvestment of dividends, if any. The stock price performance included in this graph is not necessarily indicative of future
stock price performance.
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Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
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 7.1 million shares of our common stock held by certain subsidiaries of
BMS for an aggregate purchase price of $344.5 million, or $48.38 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 could repurchase up to $600.0 million of shares of our common stock. On October 5, 2021, we terminated our Rule
10b5-1 share repurchase program and on October 13, 2021 entered into a Rule 10b-18 repurchase plan that allows us to conduct
open market repurchases over time up to our remaining authorization under the Repurchase Program. We have not repurchased
any shares of common stock in fiscal year 2022 and as of December 31, 2021, we repurchased approximately 9.1 million
shares of common stock for $458.0 million, or $50.35 per share, under the Rule 10b5-1 repurchase plan. As of December 31,
2022, we have not repurchased any shares under the Rule 10b-18 repurchase plan. In total, as of December 31, 2022, we
repurchased 16.2 million shares of common stock for $802.5 million, or $49.49 per share, under the Repurchase Program.
to capital availability, our cash balances and future capital
The amount and timing of share repurchases are subject
requirements, and our determination that share repurchases are in the best interest of our stockholders and are in compliance
with all respective laws and our applicable agreements. We have paused our share repurchases and for the foreseeable future,
we expect that our capital allocation will be prioritized towards opportunities to accelerate programs in our development
pipeline and/or pursue potential complementary business development opportunities.
Item 6. Reserved.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our
consolidated financial statements and the related notes and other financial information included elsewhere in this Annual
Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual
Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. You should review "Item 1A, Risk Factors" of this Annual Report on Form 10-K
for a discussion of important factors 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.
Overview
We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular
metabolism, with the goal of creating differentiated, small molecule medicines for rare diseases. With a history of focused study
on cellular metabolism, we have a deep and mature understanding of this biology, which is involved in the healthy functioning
of nearly every system in the body. We accelerate the impact of our portfolio by cultivating connections with patient
communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for rare
diseases.
The lead product candidate in our portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate
kinase, or PK, enzymes for the potential treatment of hemolytic anemias. In February 2022, the U.S. Food and Drug
Administration, or FDA, approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the
United States. In November 2022, we received marketing authorization from the European Commission for PYRUKYND® for
the treatment of PK deficiency in adult patients in the European Union, or EU. In December 2022, we received marketing
authorization in Great Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European
Commission Decision Reliance Procedure. In addition, we are currently evaluating PYRUKYND® in clinical trials for the
treatment of thalassemia, sickle cell disease, or SCD, and in pediatric patients with PK deficiency. We are also developing
AG-946, a novel PK activator, for the potential treatment of lower-risk myelodysplastic syndrome, or LR MDS, and hemolytic
anemias.
In addition to the aforementioned clinical development programs, we continue to invest in our late-stage research program
focused on advancing a phenylalanine hydroxylase, or PAH, stabilizer for the treatment of phenylketonuria, or PKU.
Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)
On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, which
represented a discontinued operation. The transaction included the sale of our oncology business, including TIBSOVO®, our
clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of
approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200.0 million in cash, if,
prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the FDA with an approved label
that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate
dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is
granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the
transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of
vorasidenib through loss of exclusivity. The milestone payment for approval of vorasidenib and royalty payments related to
vorasidenib and TIBSOVO® represent contingent consideration. Servier also acquired our co-commercialization rights for
BMS’s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement
with Celgene Corporation, or Celgene, and following the sale Servier will conduct certain clinical development activities within
the IDHIFA® development program.
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 15, Discontinued Operations of our consolidated
financial statements included in this Annual Report on Form 10-K for additional information. 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, or
SEC, on February 25, 2021.
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Sale of Contingent Payments
The consideration for the sale of our oncology business to Servier includes a royalty of 5% of U.S. net sales of TIBSOVO®
from the close of the transaction through loss of exclusivity, referred to as contingent payments. We recognize the contingent
payments in the royalty income from gain on sale of oncology business line item in our consolidated statement of operations in
the period when realizable. On October 27, 2022, we sold our rights to future contingent payments to entities affiliated with
Sagard Healthcare Partners, or Sagard, and recognized income of $127.9 million within the gain on sale of contingent payments
line item in our consolidated statements of operations for the year ended December 31, 2022. We retained our rights to the
potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.
Evolution of our Research Organization
In May 2022, we announced our determination to evolve our approach to exploratory research and drug discovery to focus on
our existing late-lead optimization programs and to prioritize in-licensing or acquiring assets for pipeline growth.
We reduced approximately 45 roles focused on exploratory research in connection with this evolution of our research
organization, and plan to retain an internal research team focused on roles critical to advancing our current and future late-stage
research and early clinical programs. We estimate that this initiative may provide annual average cost savings of approximately
$40 million to $50 million associated with research and related expenses between 2023 and 2026.
Financial Operations Overview
Impact of COVID-19 on our Business
As of December 31, 2022, we have not experienced a significant financial or supply chain impact directly related to the
COVID-19 pandemic, but have experienced some disruptions to clinical operations and we may in the future experience further
such disruptions. In addition, we have experienced disruptions to certain clinical and research activities at our contract research
organizations, or CROs, due to the recent COVID-19 surges. We have been monitoring our supply chain network for
disruptions due to the COVID-19 pandemic, and our third-party manufacturers, other than certain CROs based in China, 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 any 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, results of operations and 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, preparing for and executing on the
commercial launch of PYRUKYND® and, prior to the sale of our oncology business to Servier on March 31, 2021, marketing
TIBSOVO® and IDHIFA®. Through March 31, 2021, we 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 have financed and expect to continue to finance our operations primarily through cash on hand, royalty
payments from Servier with respect to U.S. net sales of TIBSOVO® prior to the sale of these contingent payments to Sagard,
proceeds from the sale of contingent payments to Sagard, a potential milestone payment and royalties from Servier if
vorasidenib is approved by the FDA, the actual and potential future sales of PYRUKYND® and, potentially, collaborations,
strategic alliances, licensing arrangements and other nondilutive strategic transactions.
Additionally, since inception, we have incurred significant operating losses. Our net loss for the year ended December 31, 2022
was $231.8 million, our net income for the year ended December 31, 2021 was $1.6 billion and our net loss for the year ended
December 31, 2020 was $327.4 million. As of December 31, 2022, we had an accumulated deficit of $470.6 million. The net
income we generated in the year ended December 31, 2021 was due to the sale of our oncology business to Servier, which was
consummated on March 31, 2021. 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:
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PYRUKYND®, and AG-946; continue to prioritize advancement of our late lead-optimization research; expand and protect our
intellectual property portfolio, including by in-licensing or acquiring assets for pipeline growth; and hire additional commercial
and development personnel.
Revenues
Our wholly owned product, PYRUKYND®, received approval from the FDA on February 17, 2022, for the treatment of
hemolytic anemia in adults with PK deficiency in the United States. Upon FDA approval of PYRUKYND® in the United
States, we began generating product revenue from sales of PYRUKYND®. We sell PYRUKYND® to a limited number of
specialty distributors and specialty pharmacy providers, or collectively, the Customers. These Customers subsequently resell
PYRUKYND® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter
into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated
rebates, chargebacks and discounts with respect to the purchase of PYRUKYND®. For further discussion of our revenue
recognition policy, see Note 2, Summary of Significant Accounting Polices and Note 8, Product Revenue, to the consolidated
financial statements in this Form 10-K.
In the future, we expect to continue to generate revenue from a combination of product sales, royalties on product sales, cost
reimbursements, milestone payments, and upfront payments to the extent we enter into future collaborations or licensing
agreements.
Cost of Sales
Cost of sales consists primarily of manufacturing costs for sales of PYRUKYND®. Based on our policy to expense costs
associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated
with product shipments of PYRUKYND® recorded during the twelve months ended December 31, 2022 were expensed prior
to February 17, 2022, and, therefore, are not included in costs of sales during the twelve months ended December 31, 2022.
Research and Development Expenses
Research and development activities are central
to our business model. Product candidates in later stages of clinical
development generally have higher development costs than those in earlier stages of clinical development, primarily due to the
increased size and duration of later-stage clinical trials. We expect research and development costs related to our rare disease
portfolio to increase significantly for the foreseeable future as our product candidate development programs progress. However,
the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate
or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the
development and to commercialize these product candidates. We are unable to predict the amount of net cash inflows from
PYRUKYND® or any of our product candidates. This is due to the numerous risks and uncertainties associated with
developing medicines, including the uncertainty of:
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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:
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employee-related expenses, including salaries, benefits and stock-based compensation expense;
expenses incurred under agreements with third parties, including CROs, that conduct research and development and both
preclinical and clinical activities on our behalf, and the cost of consultants;
the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and
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•
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and the maintenance of
facilities, insurance and other operating costs.
The following summarizes our most advanced programs:
PYRUKYND® (mitapivat): First-in-Class PK Activator
We are developing PYRUKYND® for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and
SCD. PYRUKYND® is an orally available small molecule and a potent activator of the wild-type and mutated PK enzymes.
In February 2022, the FDA approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the
United States. In November 2022, we received marketing authorization from the European Commission for PYRUKYND® for
the treatment of PK deficiency in adult patients in the EU. In December 2022, we received marketing authorization in Great
Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European Commission Decision
Reliance Procedure. In addition, we are currently evaluating PYRUKYND® in clinical trials for the treatment of thalassemia,
SCD, and in pediatric patients with PK deficiency. We have worldwide development and commercial rights to PYRUKYND®
and expect to fund the future development and commercialization costs related to this program. PYRUKYND® has been
granted orphan drug designation for the treatment of PK deficiency by the FDA and the European Medicines Agency, or EMA.
Additionally, PYRUKYND® has received orphan drug designation from the FDA for the treatment of thalassemia and SCD.
We have built our commercial infrastructure to support the commercial launch of PYRUKYND® in adult PK deficiency in the
United States. We are currently providing access to PYRUKYND® free of charge for eligible patients in the EU and Great
Britain through a global managed access program. Beyond the global managed access program, we continue to evaluate options
for the commercialization of PYRUKYND® outside of the United States, including through exploring potential partnership
opportunities.
We are evaluating PYRUKYND® in the following clinical trials:
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ENERGIZE, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and
safety of PYRUKYND® as a potential treatment for adults with non-transfusion-dependent α- or β-thalassemia, defined
as ≤5 red blood cell, or RBC, units during the 24-week period before randomization and no RBC transfusions ≤8 weeks
before providing informed consent or during the screening period. The primary endpoint of the trial is percentage of
patients with hemoglobin response, defined as a ≥1.0 g/dL increase in average hemoglobin concentration from Week 12
through Week 24 compared with baseline. Secondary endpoints include markers of hemolysis and ineffective
erythropoiesis, as well as patient-reported outcome measures. This trial is enrolling patients, and we expect to complete
enrollment by mid-year 2023.
ENERGIZE-T, a phase 3, double-blind, randomized, placebo-controlled multicenter study evaluating the efficacy and
safety of PYRUKYND® as a potential treatment for adults with transfusion-dependent α- or β-thalassemia, defined as 6
to 20 RBC units transfused and ≤6-week transfusion-free period during the 24-week period before randomization. The
primary endpoint of the trial is percentage of patients with transfusion reduction response, defined as a ≥50% reduction
in transfused RBC units with a reduction of ≥2 units of transfused RBCs in any consecutive 12-week period through
Week 48 compared with baseline. Secondary endpoints include additional transfusion reduction measures and percentage
of participants with transfusion-independence. This trial is enrolling patients, and we expect to complete enrollment by
mid-year 2023.
RISE UP, a phase 2/3 study evaluating the efficacy and safety of PYRUKYND® in SCD patients who are 16 years of
age or older, have had between two and 10 sickle cell pain crises in the past 12 months, and have hemoglobin within the
range of 5.5 to 10.5 g/dL during screening. The phase 2 portion of the trial includes a 12-week randomized, placebo-
controlled period in which participants will be randomized in a 1:1:1 ratio to receive 50 mg PYRUKYND® twice daily,
100 mg PYRUKYND® twice daily or matched placebo. The primary endpoints are hemoglobin response, defined as ≥1
g/dL increase in average hemoglobin concentration from Week 10 through Week 12 compared to baseline, and safety.
These data will be used to establish a clear dosing paradigm for the phase 3 portion. The phase 3 portion includes a 52-
week randomized, placebo-controlled period in which participants will be randomized in a 2:1 ratio to receive the
recommended PYRUKYND® dose level or placebo. The primary endpoints are hemoglobin response, defined as ≥1 g/
dL increase in average hemoglobin from baseline to Week 52, and annualized rate of sickle cell pain crises. Participants
who complete either the phase 2 or phase 3 portion will have the option to move into a 216-week open-label extension
period to continue to receive PYRUKYND®. The phase 2 portion of this trial has been fully enrolled, and we expect to
announce the data from the phase 2 portion of this trial and decide whether we are initiating the phase 3 portion of this
trial by mid-year 2023.
ACTIVATE-kids and ACTIVATE-kidsT, double-blind phase 3 studies evaluating the efficacy and safety of
PYRUKYND® as a potential treatment for PK deficiency in not regularly transfused and regularly transfused patients
between one and 18 years old, respectively. The primary endpoint of ACTIVATE-kids is percentage of patients with
hemoglobin response, defined as ≥1.5 g/dL increase in hemoglobin concentration from baseline that is sustained at two
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or more scheduled assessments at weeks 12, 16, and 20 during the double-blind period. The primary endpoint of
ACTIVATE-kidsT is transfusion reduction response, defined as ≥33% reduction in total RBC transfusion volume from
week 9 through week 32 of the double-blind period. Both trials are enrolling patients, and we expect to enroll at least
half of the patients by year-end 2023.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients
from ACTIVATE and ACTIVATE-T, our completed pivotal trials of PYRUKYND® in not regularly transfused and
regularly transfused adult patients with PK deficiency.
An extension study evaluating the long-term safety, tolerability and efficacy of treatment with PYRUKYND® in patients
from DRIVE PK, our completed global phase 2, first-in-patient, open-label safety and efficacy clinical
trial of
PYRUKYND® in adult, not regularly transfused patients with PK deficiency.
An extension study evaluating the safety, tolerability and efficacy of treatment with PYRUKYND® in patients from our
completed phase 2, open-label safety and efficacy clinical trial of PYRUKYND® in adults with non-transfusion-
dependent α- and β-thalassemia.
In collaboration with the Company, the National Institutes of Health, or NIH, is evaluating PYRUKYND® in a phase 1
trial in patients with SCD pursuant to a cooperative research and development agreement. The core trial period has
completed, and the long-term extension study is ongoing. In June 2020, clinical proof of concept was established based
on a preliminary analysis of the data from this trial.
In collaboration with the Company, UMC Utrecht, or UMC, is evaluating PYRUKYND® in patients with SCD pursuant
to an investigator sponsored trial agreement. The trial has completed enrollment and patient follow-up is ongoing, and a
2-year extension study has been activated for patients who complete the follow-up period.
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AG-946 and Other Programs
We are developing AG-946, a novel PK activator, for the potential treatment of LR MDS and hemolytic anemias. We are
evaluating AG-946, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. We have presented data from
the healthy volunteer cohort, and we have initiated the SCD patient cohort of this trial. We initiated a phase 2a study of AG-946
in adults with LR MDS in the third quarter of 2022, and we expect to complete enrollment by year-end 2023.
In addition to the aforementioned development programs, we are advancing our late-stage research program focused on a PAH
stabilizer for the treatment of PKU, for which we expect to file an IND by year-end 2023.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based
compensation, for personnel in executive, finance, business development, commercial, legal, information technology and
human resources functions. Other significant costs include facility-related costs not otherwise included in research and
development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.
We anticipate that our selling, general and administrative expenses will increase in the future to support continued research and
development activities and ongoing and future commercialization activities related to our rare disease portfolio, including the
ongoing commercialization of PYRUKYND® and any of our other product candidates. These increases will likely include
increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among
other expenses.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated
financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, we
evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we
believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements
included in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical in fully
understanding and evaluating our financial condition and results of operations and are policies that require a significant level of
judgment and estimates.
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Revenue recognition
Under Accounting Standards Codification 606, Revenue from Contracts with Customers, or ASC 606, revenue is recognized
when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to
receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined
to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only
apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange
for the goods or services we transfer to the customer.
This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as
leases, insurance, collaboration arrangements and financial instruments.
Once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each
contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We
will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation
when (or as) the performance obligation is satisfied.
Product Revenue
We generate product revenue from sales of PYRUKYND® to our Customers, who subsequently resell PYRUKYND® to
pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements
with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks
and discounts with respect to the purchase of PYRUKYND®.
The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer
obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.
Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable
consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other
allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers
relating to the sale of our products.
Contractual Adjustments. We generally provide Customers with discounts,
including prompt pay discounts, and
allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related
product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain
Customers.
Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to
qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product
from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to
the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of
possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that
the related revenue is recognized, resulting in a reduction of product revenue.
Government Rebates. Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the
expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor
mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product
revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will
owe an additional liability under the Medicare Part D program.
Returns. We estimate the amount of product sales that may be returned by Customers and record this estimate as a
reduction of revenue in the period the related product revenue is recognized. We currently estimate product return
liabilities using the expected value method, based on available industry data, including our visibility into the inventory
remaining in the distribution channel.
Accrued research and development expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses.
This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or
otherwise notified of the actual cost. Certain service providers invoice us in arrears for services performed or when contractual
milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based
on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service
providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees
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paid to: (i) CROs and other third parties in connection with clinical studies and preclinical development activities; (ii)
investigative sites in connection with clinical studies; and (iii) third parties related to product manufacturing, development and
distribution of clinical supplies.
We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and
contracts with CROs that conduct research and development on our behalf. The financial terms of these agreements are subject
to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which
payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and
development expense. In accruing service fees, we estimate the time period over which services will be performed and the level
of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our
estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from
amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and
timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular
period.
Stock-based compensation
We account for stock-based compensation awards in accordance with ASC 718, Compensation –Stock Compensation. For
stock-based awards granted to employees, non-employees and members of the board of directors for their services and for
participation in our employee stock purchase plan, we estimate the grant date fair value of each option award using the Black-
Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires us to make assumptions with respect
to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option,
risk-free interest rates and expected dividend yields of the common stock.
Expected term. We use the “simplified method” as prescribed by the SEC Staff Accounting Bulletin No. 107, Share
Based Payments, to estimate the expected term of stock option grants. Under this approach, the weighted-average
expected life is presumed to be the average of the contractual term of ten years and the weighted-average vesting term
of the stock options, taking into consideration multiple vesting tranches. We utilize this method due to lack of
historical data and the plain-vanilla nature of our share-based awards.
Volatility. The expected volatility has been determined using Agios' historical volatilities for a period equal to the
expected term of the option grant.
Risk-free rate. The risk-free rate is based on the yield curve of U.S. Treasury securities with periods commensurate
with the expected term of the options being valued.
Dividends. We have never paid, and do not anticipate paying, any cash dividends in the foreseeable future, and,
therefore, use an expected dividend yield of zero in the option-pricing model.
Forfeitures. We account for forfeitures as they occur and, therefore, do not estimate forfeitures.
For awards subject to service-based vesting conditions, we recognize stock-based compensation expense equal to the grant date
fair value of stock options on a straight-line basis over the requisite service period. For awards subject to both performance and
service-based vesting conditions, we recognize stock-based compensation expense over the remaining service period if the
performance condition is considered probable of achievement using management’s best estimates.
Discontinued Operations
We accounted for the sale of our oncology business in accordance with ASC 205, Discontinued Operations and Accounting
Standards Update, or ASU, No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components
of an Entity. We followed the held-for-sale criteria as defined in ASC 360, Property, Plant and Equipment, and ASC 205. ASC
205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash
flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations.
In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the
periods presented are reclassified into separate line items in the consolidated statements of operations. Assets and liabilities are
also reclassified into separate line items on the related consolidated balance sheets for the periods presented. The statements of
cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items.
ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a
strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the
financial statements as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations
and disclosures of discontinued operations.
Due to the sale of our oncology business during the first quarter of 2021, in accordance with ASC 205, we have classified the
results of the oncology business as discontinued operations in our consolidated statements of operations and cash flows for all
periods presented, and refer to Note 15, Discontinued Operations of our consolidated financial statements included in this
69
Annual Report on Form 10-K for additional information. All assets and liabilities associated with our oncology business were
therefore classified as assets and liabilities of discontinued oper
ations in our consolidated balance sheets for the periods
presented. All amounts included in the notes to the consolidated financial statements relate to continuing operations unless
otherwise noted.
ff
Results of Operations
Certain prior-year amounts have been reclassified to conform with current presentation.
ff
Comparison of years ended December 31, 2022, 2021 and 2020
Revenues
(In thousands)
Revenues:
Product revenue, net
Milestone revenue
Total revenue
2022
2021
2020
$
$
11,740 $
2,500
14,240 $
— $
—
— $
—
—
—
Total Revenue – 2022 vs. 2021
– The increase in total revenue of $14.2 million in 2022 compared to 2021 was due to product
TT
revenue associated with PYRUKYND®, which was approved in February 2022, and revenue recognized associated with the
licensing of intellectual property for our Friedreich's Ataxia preclinical program.
Total Operating Expenses
(In thousands)
Operating expenses
Cost of sales
Research and development
Selling, general and administrative
Total Operating Expenses
2022
2021
2020
$
1,704
$
— $
—
279,910
121,673
256,973
121,445
220,811
115,105
$ 403,287
$ 378,418 $ 335,916
Total O
perO ating Expenses – 2022 vs. 2021 – The increase in total operating expenses of $24.9 million in 2022 compared to
TT
2021 was primarily due to an increase of $22.9 million in research and development expenses, which is described below under
Research and Development Expenses.
Total Operating Expenses – 2021 vs 2020 – The increase in total operating expenses of $42.5 million in 2021 compared to 2020
was primarily due to an increase of $36.2 million in research and development expenses, which is described below under
Research and Development Expenses, and an increase of $6.3 million in selling, general and administrative expense due to
higher personnel costs related to additional hiring for our sales workforce and commercial launch preparation activities in
anticipation of the FDA approval of PYRUKYND®. Included in selling, general and administrative expenses is approximately
$4.4 million of reimbursable transition related services we provided to Servier related to the sale of the oncology business.
70
Research and Development Expenses
Our research and development expenses, by major program, are outlined in the table below:
(In thousands)
PK activator (PYRUKYND®)
Novel PK activator (AG-946)
Other research and platform programs
Total direct research and development expenses
Compensation and related expenses
Facilities and IT related expenses & other
Other expenses - transition services
Total indirect research and development expenses
Total research and development expense
2022
2021
2020
$ 83,271
$ 73,999 $ 48,669
15,747
26,837
125,855
109,248
43,290
1,517
10,658
22,959
107,616
95,198
44,767
9,392
8,378
13,790
70,837
99,923
50,051
—
154,055
149,357
149,974
$ 279,910
$ 256,973 $ 220,811
Total Research and Developm
ent Expenses – 2022 vs. 2021 – The increase in research and development expenses of
TT
$22.9 million in 2022 compared to 2021 was due to a $18.2 million increase in our direct expenses and a $4.7 million increase
in our indirect expenses. The increase in direct expenses was due to a $9.3 million increase in PYRUKYND® costs, a $5.1
million increase in AG-946 costs, and a $3.9 million increase in other research and platform programs. The increase in
PYRUKYND® costs was primarily due to increased costs for the phase 3 trials of PYRUKYND® in patients with thalassemia,
ENERGIZE and ENERGIZE-T, the phase 3 trials of PYRUKYND® in pediatric patients with PK deficiency, ACTIVATE-kids
and ACTIVATE-kidsT, and the phase 2/3 trial of PYRUKYND® in patients with SCD, RISE UP, offset by closeouts of the
ACTIVATE and ACTIVATE-T studies. The increase in AG-946 costs was primarily due to start-up costs for the phase 2 trial
ealthy volunteers and in patients
of AG-946 in patients with LR MDS and increased spend for the phase 1 trial of AG-946 in healthy volunteers and in patients
ch and platform programs was primarily driven by increased activity associated wi hith our
wi hith SCD h. The iincrease i
ppreclinical PAH program as well as increased activity on various other exploratory activities. The
in indirect expenses
was priimarily due to a
in compensation and related expenses primarily due to increased headcount, as
$14.1 million iincrease in compensation and related expenses primarily due to increased headcount, as
well as certain workforce-related expenses associated with the evolution of our research organization. This increase was
partially offset by $7.9 million of additional reimbursable transition related services we provided to Servier in 2021 compared
to 2022 related to the sale of the oncology business for discovery, clinical development, technical operations, and related
activities, which were completed during the three months ended March 31, 2022.
ell as certain workforce-related expenses associated with the evolution of our research organization. Th
eclinical PAH program as well as increased activity on various other exploratory activities. The iincrease i
in other research and platform programs was primarily driven by increased activity associated w
ily due to a $
i di
illi
h
Total Research and Development Expenses – 2021 vs 2020 – The increase in research and development expenses of
$36.2 million in 2021 compared to 2020 was primarily due to a $36.8 million increase in our direct expenses. The increase in
direct expenses was primarily due to a $25.3 million increase in PYRUKYND® costs and a $9.2 million increase in other
research and platform programs. The increase in PYRUKYND® costs was primarily due to startup costs for the initiated phase
3 trials of PYRUKYND®, ENERGIZE and ENERGIZE-T, and the phase 2/3 trial of PYRUKYND® in patients with SCD,
RISE UP, offff sff et by closeouts of ACTIVATE & ACTIVATE-T studies, and commercial launch preparation activities. The
increase in other research and platforff m programs costs was primarily driven by planned increased activity on various
exploratory activities. Included in total indirect res
earch and development expenses was $9.4 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 related activities which will continue for periods ranging from one month to approximately one year
after March 31, 2021.
rr
Other InII come and Expense
(In thousands)
Gain on sale of contingent payments
Royalty income from gain on sale of oncology business
Interest income, net
Other income, net
2022
2021
2020
$ 127,853
$
— $
9,851
12,793
6,749
6,639
836
14,433
—
—
6,611
—
ff
e and Expense – 2022 vs. 2021 – The $127.9 million gain on sale of contingent payments in 2022 was due to the
Other IncomII
October 27, 2022 sale of future contingent payments to entities affiliated with S
agard. The $12.0 million increase in interest
income, net in 2022 compared to 2021 is primarily attributable to an increase in interest rates. The $3.2 million increase in
royalty income from gain on sale of oncology business related to higher income from royalties on U.S. net sales of TIBSOVO®
by Servier in 2022 compared to 2021. The $7.7 million decrease in other income, net in 2022 compared to 2021 primarily
related to approximately $13.8 million of reimbursable transition related services and fees for the sale of the oncology business
ff
71
in 2021 compared to $2.6 million in 2022, partially offset by sublease income of $4.1 million in 2022 compar
ff
in 2021.
ed to $0.5 million
Other Income and Expense – 2021 vs 2020 – The increase in other income, net in 2021 compared to 2020, primarily relates to
approximately $13.8 million of reimbursable transition related services and fees for the sale of the oncology business for the
year ended December 31, 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 $6.6 million for the year ended December 31, 2021. The decrease in
interest income, net is primarily attributable to a decrease in interest rates.
ff
Loss from Operations and Net InII come (Loss)
(In thousands)
Net loss from continuing operations
Net income from discontinued operations, net of tax
Net (loss) income
2022
2021
2020
$ (231,801) $ (356,510) $ (329,305)
— 1,961,225
1,935
(231,801) 1,604,715
(327,370)
– The $124.7 million decrease in net loss from continuing
II
Loss from OperO ations and Net (L(( oss) Is
ncome – 2022 vs 2021
operations in 2022 compared to 2021 was primarily driven by the gain on sale of contingent payments in 2022 described above
in Other Income and Expense, the increase in revenue in 2022 compared to 2021 discussed above under Revenues, and the
increase in interest income, net and royalty income from gain on sale of oncology business discussed above under Other Income
and Expense. These were partially offff sff et by higher research and development expenses discussed above under Research and
Development Expenses and a decrease in other income, net discussed above under Other Income and Expense. The change in
net income from discontinued operations and net (loss) income in 2022 compared to 2021 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.
Loss from Operations and Net Income (Loss) – 2021 vs 2020 – The increase in net loss from continuing operations in 2021
compared to 2020 was primarily driven by higher research and development expenses discussed above under Research and
Development Expenses, partially offset by $13.9 million of reimbursable transition related services and fees related to the sale
of the oncology business and a $6.6 million gain on sale of oncology business related to income from royalties on U.S. net sales
of TIBSOVO® by Servier. The change in net income from discontinued operations and net income (loss) for the year ended
December 31, 2021 compared to the year ended December 31, 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.
ff
ff
Liquidity and Capital Resources
Sources of liquidity
ff
Since our inception, and through March 31, 2021, we financed our operations primarily through proceeds from the sale of our
royalty rights, commercial sales of TIBSOVO®, funding received from our collaboration agreements, private placements of our
preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an
affiliate of Celgene, and our follow-on public offerings. F
ollowing the sale of our oncology business to Servier on March 31,
2021, we have financed and expect to continue to finance our operations primarily through cash on hand, royalty payments
from Servier with respect to U.S. net sales of TIBSOVO® prior to the sale of these contingent payments to Sagard, proceeds
from the sale of contingent payments to Sagard, a potential milestone payment and royalties from Servier if vorasidenib is
approved by the FDA, the actual and potential future sales of PYRUKYND® and, potentially, collaborations, strategic
alliances, licensing arrangements and other nondilutive strategic transactions.
ff
i
h
did
iness to Servier. The transaction included the sale of our
i
On Mar hch 31, 2021, we completed the sale of our oncology bus
e completed the sale of our oncology busi
oncology business, including TIBSOVO®, our clinical-s
oduct candidates vorasidenib, AG-270 and AG-636, and our
oncology business, including TIBSOVO®, our clinical-s gtage pr d
oncology r
earch programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments,
oncology research programs for a payment of approximately $1.8 billion in cash at the closing, subject to certain adjustments,
and a payment of $200.0 million in cash, if, prior to January 1, 2027, vorasidenib is granted NDA approval from the FDA wi hith
and a payment of $200.0 million in cash, if, prior to January 1, 2027, vorasidenib is granted NDA approval from the FDA w
oved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma
an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Gr
ade 2 glioma
that have an isocitrate dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion
that have an isocitrate dehydrogenas
e 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
tic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the
diagnos
action through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first
e of the transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first
f h
lclos
commercial sale of vorasidenib through loss of exclusivity. The milestone payment for approval of vorasidenib and royalty
cial sale of vorasidenib through loss of exclusivity.
payments related to vorasidenib and TIBSOVO® represent contingent consideration. S
ervier also acquired our co-
cialization rights for BMS's IDHIFA® and the right to receive a $25.0 million potential milestone payment under our
commercialization rights for BM
s IDHIFA® and the right to receive a $25.0 million potential milestone payment under our
tain clinical
l
ll b
ppri
Summary of Significant
development activities within the IDHIFA® development progra
development activities within the IDHIFA® development program. As discussed below in Note 2,
esponsible for conducting cer
ation agreement with Celgene, and following the sale Servier is responsible for conducting cer
ior collaboration agreement with Celgene, and following the sale Servier is r
l d d h
id ib
i d
li i
f
d
d
i
l
i
l
i
72
Accounting Policies, on October 27, 2022, we sold our rights to future contingent payments to Sagard for $131.8 million. We
retained our rights to the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.
ff
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 BMS to repurchase 7.1 million shares of our common stock held by certain subsidiaries of BMS for an
aggregate purchase price of $344.5 million, or $48.38 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
e terminated our Rule 10b5-1
we could repurchase up to $600.0 million of shares of our common stock. O
i
l
shhare repur hchase pr gogr
18 repurchase plan that allows us to conduct
d i
am and on October 13, 2021 w
b
open market repurchases over time up to our remaining authorization under the Repurchase Program. We have not repurchased
open market repurchases over time up to our remaining authorization under the Repurchase Pr
ogram.
9.1 million hshares
and as of December 31, 2021, we repurchased approximately
any shares of common stock in fiscal year 2022 and as of December 31, 2021, we repurchased approximately
$458.0 million, or $$50.35 per share, under the Rule 10b5-1 repurchase plan. As of December 31, 2022
, we
per share, under the Rule 10b5-1 repurchase plan. As of
of common s
e plan. In total, as of
hhave not repurchased any shares under the Rule 10b-
epurchas ded
h
epurchase plan. In total, as of December 31, 2022
$802.5 million, or $$49.49 per share, under the Repurchase Program. We have paused
illi
16.2 million shhar
per share, under the Repurchase Program. We have paused
illi
hare repurchas
our sh
eeable future, we expect that our capital allocation will be prioritized towardds
l
i
f
tunities to accelerate programs in our development pipeline and/or pursue potential complementary business development
opportunities to accelerate programs in our development pipeline and/or pursue potential complementary business development
tunities.
i i
oppor
tock for $
k f
chased any shares under the Rule 10b-18 r
k f
h f
f
es of common stock for $
es and for the fores
h
e entered into a Rule 10b-
b
n October 5, 2021, w
, we r
i i d
ill b
d f
b
d
illi
illi
bl
ll
ll
h
h
h
b
d
h
d
ff
l
l
i
i
On April 30, 2020, we entered into an at-the-market sales agreement, or the 2020 sales agreement, with Cowen & Company
LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up
to $250.0 million through Cowen pursuant to a universal shelf registration statement on Form S-3 filed with the SEC on April
30, 2020. As of December 31, 2022, $250.0 million in common stock remained available for future issuance under the 2020
sales agreement. On February 15, 2023, we delivered written notice to Cowen that we were terminating the 2020 sales
agreement, effff ective on F
ebruary 22, 2023. As of the termination of the 2020 sales agreement, we had not sold any shares of
ff
our common stock under the 2020 sales agreement.
In addition to our cash, cash equivalents and marketable securities of $1.1 billion at December 31, 2022, we are eligible to
receive a $200.0 million milestone payment and royalty payments on U.S. net sales of vorasidenib under our transaction
agreement with Servier. Our right to such payments under our transaction agreement with 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, which are outside our control, including adverse clinical developments with respect to
vorasidenib. Furthermore, we cannot predict what success, if any, Servier may have in the United States with respect to sales of
vorasidenib, if approved, and consequently we cannot estimate the amount of royalty payments that we can expect to receive
from Servier prior to the loss of exclusivity of vorasidenib.
ff
Cash flows
The following table provides information regarding our cash flows for the years ended December 31, 2022, 2021 and 2020:
(In thousands)
Net cash used in operating activities
Net cash provided by investing activities
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Net cash used in operating activities
2022
2021
2020
$
(309,478) $
(407,320) $
(290,759)
243,261
1,248,778
2,350
(765,768)
75,746
261,518
$
(63,867) $
75,690
$
46,505
Cash used in operating activities of $309.5 million during the year ended December 31, 2022, of which all was used by
continuing operations, was primarily due to operating expenses driven by research and development costs described above
under Research and Development Expenses, partially offset by cash received from revenues of $13.3 million, cash received
related to interest income of $11.6 million and cash received from royalties on U.S. net sales of TIBSOVO® of $8.6 million.
ff
Cash used in operating activities of $407.3 million during the year ended December 31, 2021, of which $314.1 million was used
by continuing operations and $93.2 million was used by discontinued operations, was primarily due to operating expenses
driven by research and development costs described above in Research and Development Expenses, offset by cash received of
$39.5 million from sales of TIBSOVO®, and $1.2 million in cost reimbursements related to our collaboration agreements with
Celgene.
Cash used in operating activities of $290.8 million during the year ended December 31, 2020, of which $243.9 million was used
by continuing operations and $46.8 million was used by discontinued operations, was primarily due to operating expenses
driven by research and development costs described above in Research and Development Expenses, offset by cash received of
73
$123.8 million from sales of TIBSOVO®, $7.9 million in royalty payments and $6.1 million in cost reimbursements related to
our Collaboration Agreements with Celgene, $7.0 million in interest received, and $3.6 million in cost reimbursements related
to our agreement with CStone Pharmaceuticals.
Net cash provided by investing activities
The cash provided by investing activities for the year ended December 31, 2022, of which all was provided by continuing
operations, was primarily due to cash received of $131.8 million from the sale of future contingent payments described above in
Other Income and Expense and higher proceeds from maturities and sales of marketable securities than purchases of marketable
securities.
The cash provided by investing activities for the year ended December 31, 2021, of which $1,802.9 million was provided by
discontinued operations and $554.2 million was used by continuing 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, and
the result of higher purchases of marketable securities than proceeds from maturities and sales of marketable securities.
The cash provided by investing activities for the year ended December 31, 2020, of which $76.5 million was provided by
continuing operations and $0.8 million was used by discontinued operations was primarily the result of lower purchases of
marketable securities than proceeds from maturities and sales of marketable securities, offset by $14.9 million in purchases of
property and equipment.
Net cash provided by (used in) financing activities
The cash provided by financing activities for the year ended December 31, 2022 was primarily due to $2.7 million of proceeds
received from stock option exercises and purchases made pursuant to our employee stock purchase plan.
The cash used in financing activities for the year ended December 31, 2021 was primarily the due to the repurchase of common
stock under our Repurchase Program of $802.5 million, partially offset by $37.3 million of proceeds received from stock option
exercises and purchases made pursuant to our employee stock purchase plan.
The cash provided by financing activities for the year ended December 31, 2020 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 the $11.3 million of proceeds received from stock option
exercises and purchases made pursuant to our employee stock purchase plan.
Funding requirements
We expect our expenses to increase as we continue the research, development and clinical trials of, seek marketing approvals
for, and commercialize our product candidates in our rare disease portfolio, including as we continue to commercialize
PYRUKYND®. If we obtain marketing approval for PYRUKYND® in other indications outside of the United States or for any
of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution.
We expect that our existing cash, cash equivalents and marketable securities as of December 31, 2022, together with anticipated
product revenue and interest income will enable us to execute our operating plan, including funding our currently planned
development programs for mitapivat, AG-946 and PAH, and commercializing mitapivat outside of the US through one or more
partnerships, to cash-flow positivity without the need to raise additional equity. Our future capital requirements will depend on
many factors, including:
•
•
•
•
•
•
•
•
•
the amount and timing of future revenue received from commercial sales of PYRUKYND® or any of our product
candidates for which we may receive marketing approval;
the amount of contingent consideration we ultimately receive from Servier;
the costs and timing of our ongoing commercialization activities, including product manufacturing, sales, marketing and
distribution for PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency;
the anticipated cost-savings associated with the evolution of our research organization;
the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for
our product candidates;
the costs associated with in-licensing or acquiring assets for pipeline growth;
the costs, timing and outcome of regulatory review of our product candidates;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending intellectual property-related claims;
the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and
distribution, for any of our product candidates for which we may receive marketing approval;
74
•
•
•
•
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
operational delays, disruptions and/or increased costs associated with rising global energy prices or energy shortages or
rationing.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs primarily through
cash on hand, the potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA, the actual and
potential future sales of PYRUKYND® and, potentially, collaborations, strategic alliances, licensing arrangements and other
nondilutive strategic transactions. In addition, in connection with potential future strategic transactions, we may pursue
opportunistic debt offer
ings, and equity or equity-linked offerings. We do not have any committed external source of funds
other than the potential milestone and royalty payments that we are eligible to receive with respect to vorasidenib under our
purchase agreement with Servier. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve
agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures or declaring dividends.
ff
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 effff orff
ts, or grant rights to develop and market product candidates that we would otherwise prefer to develop
and market ourselves.
ff
Offff -ff 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
The following table summarizes our significant contractual obligations as of the payment due date by period at December 31,
2022:
(In thousands)
Operating lease obligations (1)
Manufacturing arrangements (2)
Service arrangements (3)
Payments due by period
Total
Less
than
1 year
1-3
years
3-5
years
More
than
5 years
$
99,203
$
16,651
$
38,167
$
40,906
$
3,479
904
9,300
301
1,860
603
3,720
—
3,720
—
—
(1) Relates to payment obligations under lease agreements covering approximately 146,000 square feet at 88 Sidney Street, 43,000 square feet at 64 Sidney
Street, and 13,000 square feet at 38 Sidney Street, Cambridge, Massachusetts. All leases, as amended, expire on February 29, 2028. At the end of the initial
lease period, we have the option to extend the leases at all facilities for two consecutive five year periods at the fair market rent at the time of the extension.
rr
(2) Relates to payment obligations under a packaging and supply agreement for dr
ug pr
ff
oduct.
(3) Relates to payment obligations under a development and manufacturing services agreement for drug product.
We enter into agreements in the normal course of business with CROs for clinical tr
ials and contract manufacturing
organizations, or CMOs, 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, and are thus not included in the contractual obligations table. The service arrangement included in the
table above is for a contractual term of five years, however, the total funds can be allocated in any manner to meet the
agreement terms. Amounts included assume equal payments each year.
ff
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2022 and December 31, 2021, we had
cash, cash equivalents and marketable securities of $1.1 billion and $1.3 billion, respectively, consisting 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
75
could fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk
profile of our investments, we do not believe an immediate and uniform 100 basis point change in interest rates would have a
material effect on the fair market value of our investment portfolio.
We are also exposed to market risk related to changes in foreign currency exchange rates. We have contracts with CROs and
CMOs that are located in Asia and Europe that are denominated in foreign currencies. 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
December 31, 2022 and December 31, 2021, we had minimal or no liabilities denominated in foreign currencies.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An
index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on
Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of
the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures.
Based on that evaluation of our disclosure controls and procedures as of December 31, 2022, 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 are 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 us in the reports we file or
submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer
and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 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.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process
designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of
directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial
reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on our financial statements.
Because of its inherent
internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
limitations,
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
76
Commission (COSO) in its 2013 Internal Control – Integrated Framework. Based on our assessment, our management has
concluded that, as of December 31, 2022, our internal control over financial reporting is effective based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included
herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
77
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and
Exchange Commission, or SEC, with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by
reference.
Item 11. Executive Compensation
The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2023 Annual Meeting of Stockholders and, other than the information required by Item 402(v) of Regulation S-
K, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with
respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
78
Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements
PART IV
The following documents are included on pages F-1 thr
ff
ough F-30 attached hereto and are filed as part of this Annual
Report on Form 10-K.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2
4
5
6
7
8
9
(2) Financial Statement Schedules
Schedules have been omitted since they are either not required or not applicable or the information is otherwise
included herein.
(3) Exhibits
Filed
Herewith
X
Exhibit
Number
2.1
2.2**
3.1
3.2
4.1
4.2
10.1#
10.2#
10.3#
10.4#
10.5#
Description of Exhibit
Incorporated by Reference
Purchase and Sale Agreement, dated as of
December 20, 2020, by and among the
Registrant, Servier Pharmaceuticals, LLC,
and, solely for purposes of guaranteeing
certain obligations of the Purchaser,
Servier S.A.S
Purchase and Sale Agreement, dated
October 27, 2022, by and among the
Registrant, S gagardd Healthcare Royalty
ealthcare Royalty
tners, LP
Partners, LP and S
tners Co-Invest Designated Activity
Partners Co-Invest Designated Activity
Company
y
gagardd H l healthcare
Restated Certificate of Incorproation of
the Registrant
Second Amended and Restated By-Laws
Specimen Stock Certificate evidencing
the shares of common stock
Description of Securities Registered
Under Section 12 of the Securities
Exchange Act of 1934
2007 Stock Incentive Plan
Form of Incentive Stock Option
Agreement under 2007 Stock Incentive
Plan
Form of Nonstatutory Stock Option
Agreement under 2007 Stock Incentive
Plan
2013 Stock Incentive Plan
Form of Incentive Stock Option
Agreement under 2013 Stock Incentive
Plan
Form
8-K
Date of Filing
File
Number
001-36014 December 22, 2020
Exhibit
Number
2.1
8-K
8-K
S-1
001-36014
July 30, 2013
001-36014 December 19, 2018
June 24, 2013
333-189216
10-K
001-36014
February 19, 2020
rr
3.1
3.1
4.1
4.3
S-1
S-1
333-189216
333-189216
June 10, 2013
June 10, 2013
10.1
10.2
S-1
333-189216
June 10, 2013
10.3
S-1
S-1
333-189216
333-189216
June 24, 2013
June 24, 2013
10.4
10.5
79
10.6#
10.7#
10.8
10.9#
10.10
10.11
10.12#
10.13
10.14#
10.15
10.16
10.17
10.18#
10.19#
10.20#
10.21
10.22
10.23
10.24#
Form of Nonstatutory Stock Option
Agreement under 2013 Stock Incentive
Plan
2013 Employee Stock Purchase Plan
Form of Indemnification Agreement
between the Registrant and each of its
Executive Officers and Directors
Letter Agreement, dated as of April 1,
2014, between the Registrant and
Christopher Bowden, Ph.D.
Lease, dated as of September 15, 2014,
between the Registrant and Forest City 88
Sidney, LLC
First Amendment to Lease for 88 Sidney
Street, dated as of November 21, 2014,
between the Registrant and Forest City 88
Sidney, LLC
Summary Description of Annual Cash
Incentive Program
Second Amendment to Lease for 88
Sidney Street, dated July 20, 2015, by and
between the Registrant and Forest City 88
Sidney Street, LLC
Form of Performance Share Unit
Agreement under 2013 Stock Incentive
Plan
Lease, dated as of November 17, 2017,
between the Registrant and UP 64 Sidney
Street, LLC
Third Amendment to Lease for 88 Sidney
Street, dated November 17, 2017, by and
between the Registrant and Forest City 88
Sidney Street, LLC
First Amendment of Lease, dated April
11, 2018, by and between UP 64 Sidney
Street, LLC and Agios Pharmaceuticals.
Inc.
Form of Restricted Stock Unit Agreement
under 2013 Stock Incentive Plan (for
employees)
Letter Agreement, dated as of August 30,
2018, between the Registrant and
Jacqualyn A. Fouse, Ph.D.
Form of Restricted Stock Unit Agreement
under 2013 Stock Incentive Plan (for
directors)
Lease, dated as of April 11, 2019, by and
between the Registrant and Thirty-Eight
Sidney Street Limited LLC
Fourth Amendment to Lease, dated as of
April 11, 2019, by and between the
Registrant and Forest City 88 Sidney
Street, LLC
Third Amendment of Lease, dated as of
April 11, 2019, by and between the
Registrant and UP 64 Sidney Street, LLC
Letter Agreement, dated as of September
17, 2019, between the Registrant and
Jonathan Biller
S-1
333-189216
June 24, 2013
10.6
S-1
S-1
333-189216
333-189216
June 24, 2013
July 11, 2013
10.7
10.12
10-K
001-36014
February 26, 2016
10.13
8-K
001-36014 September 19, 2014
10.1
8-K
001-36014 November 26, 2014
10.1
10-Q
001-36014
May 11, 2015
8-K
001-36014
July 23, 2015
10.1
10.1
10-K
001-36014
February 26, 2016
10.25
8-K
001-36014 November 22, 2017
10.1
8-K
001-36014 November 22, 2017
10.2
8-K
001-36014
April 13, 2018
10.1
10-Q
001-36014
May 4, 2018
10.1
10-Q
001-36014
November 1, 2018
10.2
10-K
001-36014
February 14, 2019
10.32
10-Q
001-36014
August 1, 2019
10.1
10-Q
001-36014
August 1, 2019
10.2
10-Q
001-36014
August 1, 2019
10.3
10-K
001-36014
February 19, 2020
10.35
80
10.25#
10.26
10.27
10.28
10.29#
10.30#
10.31#
Letter Agreement, dated as of October 7,
between the Registrant and Bruce Car
Sales Agreement, dated April 30, 2020,
by and between the Registrant and Cowen
and Company, LLC
Sublease Agreement, dated July 27, 2021,
between the Registrant and Prime
Medicine, Inc. (38 Sidney Street)
Sublease Agreement, dated July 27, 2021,
between the Registrant and Prime
Medicine, Inc. (64 Sidney Street)
Letter Agreement, dated July 8, 2022,
between the Registrant and Brian Goff
Form of Inducement Stock Option
Agreement for Brian Goff
Form of Inducement Restricted Stock
Unit Agreement for Brian Goff
10-Q
001-36014
April 30, 2020
10.1
S-3ASR 333-237930
April 30, 2020
1.2
10-Q
001-36014
November 3, 2021
10.2
10-K
001-36014
February 24, 2022
10.44
10-Q
001-36014
August 4, 2022
10-Q
001-36014
August 4, 2022
10-Q
001-36014
August 4, 2022
10.32#** Form of Inducement Performance Stock
10-Q
001-36014
August 4, 2022
10-Q
001-36014
November 3, 2022
S-8
S-8
S-8
333-
267624
333-
267624
333-
267624
September 26, 2022
September 26, 2022
September 26, 2022
8-K
001-36014
October 7, 2022
S-8
S-8
S-8
333-
269018
333-
269108
333-
269108
January 3, 2023
January 3, 2023
January 3, 2023
10-Q
001-36014
August 4, 2022
10.33#
10.34#
10.35#
Unit Agreement for Brian Goff
Letter Agreement, dated as of September
16, 2022, between the Registrant and
Cecilia Jones
Form of Inducement Stock Option
Agreement for Cecilia Jones
Form of Inducement Restricted Stock
Unit Agreement for Cecilia Jones
10.36#** Form of Inducement Performance Stock
10.37#
10.38#
10.39#
10.40#
Unit Agreement for Cecilia Jones
Amended and Restated Severance
Benefits Plan
Letter Agreement, dated as of December
5, 2022, between the Registrant and
Tsveta Milanova
Form of Inducement Stock Option
Agreement for Tsveta Milanova
Form of Inducement Restricted Stock
Unit Agreement for Tsveta Milanova
10.41#** Form of Inducement Performance Stock
Unit Agreement for Tsveta Milanova
10.42#
10.43#
21.1
23.1
31.1
Consulting Agreement, dated May 23,
2022, by and between the Registrant and
Bruce Car
Consulting Agreement, dated January 1,
2023, by and between the Registrant and
Richa Poddar
Subsidiaries of the Registrant
Consent of PricewaterhouseCoopers LLP,
an Independent Registered Public
Accounting Firm
Certification of principal executive officer
pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities Exchange Act of 1934, as
amended
81
10.2
10.3
10.4
10.5
10.5
99.1
99.2
99.3
10.1
99.1
99.2
99.3
10.1
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
31.2
32.1*
32.2*
Certification of principal financial officer
pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities Exchange Act of 1934, as
amended.
Certification of principal executive officer
pursuant to 18 U.S.C. §1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
Certification of principal financial officer
pursuant to 18 U.S.C. §1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
Document
101.CAL XBRL Taxonomy Calculation Linkbase
Document
101.DEF XBRL Taxonomy Extension Definition
Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase
Document
101.PRE XBRL Taxonomy Presentation Linkbase
Document
Cover Page Interactive Data File
(formatted as Inline XBRL and contained
in Exhibit 101)
104
#
*
**
Item 16. Form 10-K Summary
None.
82
Indicates management contract or compensatory plan or arrangement.
This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, or otherwise subject to the liability of that section. Such certification will not
be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent specifically incorporated by reference into such filing.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
February 23, 2023
rr
AGIOS PHARMACEUTICALS, INC.
By:
/s/ Brian Goff
Brian Goff
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
ff
follow
ing persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Brian Goff
Brian Goff
/s/ Cecilia Jones
Cecilia Jones
/s/ T.J. Washburn
T.J. Washburn
/s/ Jacqualyn A. Fouse
Jacqualyn A. Fouse, Ph.D.
/s/ Rahul Ballal
Rahul Ballal, Ph.D.
/s/ Paul J. Clancy
Paul J. Clancy
/s/ Kaye Foster
Kaye Foster
/s/ Maykin Ho
Maykin Ho, Ph.D.
/s/ John M. Maraganore
John M. Maraganore, Ph.D.
/s/ David Scadden
David Scadden, M.D.
/s/ David P. Schenkein
David P. Schenkein, M.D.
/s/ Cynthia Smith
Cynthia Smith
Title
Chief Executive Officer
(Principal executive officer)
ff
Date
February 23, 2023
Chief Financial Officer
(Principal financial officer)
February 23, 2023
Vice President, Controller
(Principal accounting officer)
February 23, 2023
Chair of the Board of Directors
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
Director
February 23, 2023
83
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Agios Pharmaceuticals, Inc.
Index to Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2
4
5
6
7
8
9
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Agios Pharmaceuticals, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Agios Pharmaceuticals, Inc. and its subsidiaries (the
“Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive
income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
F-2
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for the Sagard agreement
As described in Note 1 to the consolidated financial statements, the consideration for the sale of the Company’s oncology
business to Servier includes a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of
exclusivity, referred to as contingent payments. The Company recognizes the contingent payments in the royalty income from
gain on sale of oncology business line item in the consolidated statement of operations in the period when realizable. On
October 27, 2022, the Company sold their rights to future contingent payments, to entities affiliated with Sagard Healthcare
Partners, or Sagard, and recognized income of $127.9 million within the gain on sale of contingent payments line item in the
consolidated statement of operations for the year ended December 31, 2022.
The principal considerations for our determination that performing procedures relating to accounting for the Sagard agreement
is a critical audit matter are (i) the significant judgment by management when determining the appropriate accounting for the
sale of the rights to future contingent payments, and (ii) a high degree of auditor judgment and effort in performing procedures
and evaluating audit evidence related to management’s assessment of the accounting analysis and conclusions for the Sagard
agreement.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls related to
management’s accounting analysis and conclusions, including controls over management’s assessment of the terms and
conditions of the Sagard agreement. These procedures also included, among others, (i) reviewing the terms and conditions in
the Sagard agreement, and (ii) evaluating management’s assessment of the accounting analysis and conclusions, including
evaluating the impact of legal considerations.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2023
We have served as the Company’s auditor since 2017.
F-3
Agios Pharmaceuticals, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share data) December 31:
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Other receivable
Inventory
Prepaid expenses and other current assets
Total current assets
Marketable securities
Operating lease assets
Property and equipment, net
Financing lease assets
Other non-current assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Operating lease liabilities
Financing lease liabilities
Total current liabilities
Operating lease liabilities, net of current portion
Financing lease liabilities, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingent liabilities (Note 16)
Stockholders’ equity:
2022
2021
$
139,259
$
203,126
643,860
816,892
2,206
—
8,492
38,955
832,772
313,874
65,129
22,987
—
3,956
—
4,378
—
39,835
1,064,231
266,375
75,124
28,923
183
2,900
$ 1,238,718
$ 1,437,736
$
18,616
$
30,350
13,663
—
62,629
71,996
—
3,279
16,700
31,967
10,828
331
59,826
85,659
276
—
137,904
145,761
red stock, $0.001 par value; 25,000,000 shares authorized, no shares issued and
Preferff
outstanding at December 31, 2022 and 2021
Common stock, $0.001 par value; 125,000,000 shares authorized; 71,256,118 shares
issued and 55,039,707 outstanding at December 31, 2022 and 70,550,631 shares issued
and 54,334,220 outstanding at December 31, 2021
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Treasury stock, at cost (16,216,411 shares at December 31, 2022 and December 31, 2021)
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
71
—
71
2,386,325
2,334,348
(12,535)
(470,561)
(802,486)
(1,198)
(238,760)
(802,486)
1,100,814
1,291,975
$ 1,238,718
$ 1,437,736
See accompanying Notes to Consolidated Financial Statements.
m
F-4
Agios Pharmaceuticals, Inc.
Consolidated Statements of Operations
(In thousands, except share and per share data) Years Ended December 31:
Revenues:
Product revenue, net
Milestone revenue
Total revenue
Operating expenses
Cost of sales
Research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Gain on sale of contingent payments
Royalty income frff om gain on sale of oncology business
Interest income, net
Other income, net
Net loss from continuing operations
Net income from discontinued operations, net of tax
Net (loss) income
Net loss from continuing operations per share - basic and diluted
Net income from discontinued operations per share - basic and diluted
Net (loss) income per share - basic and diluted
Weighted-average number of common shares used in computing net loss per
share from continuing operations, net income per share from discontinued
operations and net (loss) income per share – basic and diluted
2022
2021
2020
$
11,740
$
— $
2,500
14,240
—
—
$
1,704
$
— $
—
—
—
—
279,910
121,673
403,287
256,973
121,445
378,418
220,811
115,105
335,916
(389,047)
(378,418)
(335,916)
127,853
9,851
12,793
6,749
—
6,639
836
14,433
—
—
6,611
—
(231,801)
(356,510)
(329,305)
—
1,961,225
1,935
(231,801) $ 1,604,715
$
(327,370)
(4.23) $
— $
(4.23) $
(5.90) $
32.45
26.55
$
$
(4.77)
0.03
(4.74)
$
$
$
$
54,789,435
60,447,346
68,997,879
See accompanying Notes to Consolidated Financial Statements.
m
F-5
Agios Pharmaceuticals, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(In thousands) Years Ended December 31:
Net (loss) income
Other comprehensive (loss) income
2022
2021
2020
$
(231,801) $ 1,604,715
$
(327,370)
Unrealized loss on available-for-sale securities
Comprehensive (loss) income
(11,337)
(1,303)
(97)
$
(243,138) $ 1,603,412
$
(327,467)
See accompanying Notes to Consolidated Financial Statements.
m
F-6
Agios Pharmaceuticals, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share
amounts)
ommon Stock
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensi
ve
Income
(Loss)
Treasury
Accumulated
Defiff cit
Shares
Amount
Total
Stockholders’
Equity
Balance at December 31, 2019
68,401,105
$
68
$ 2,156,363
$
202
$ (1,516,105)
— $
— $
640,528
Unrealized loss on available-
forff
-sale securities
Net loss
Stock-based compensation
expense
Issuance of common stock
under stock incentive and
employee stock purchase
plans
Disposition of oncology
business
—
—
—
892,815
—
Balance at December 31, 2020
69,293,920
$
Unrealized loss on available-
forff
-sale securities
Net income
Stock-based compensation
expense
Issuance of common stock
under stock incentive and
employee stock purchase
plans
Repurchase of common stock
Disposition of oncology
business
—
—
—
1,256,711
—
—
Balance at December 31, 2021
70,550,631
$
Unrealized loss on available-
forff
-sale securities
Net loss
Stock-based compensation
expense
Issuance of common stock
under stock incentive and
employee stock purchase
plans
—
—
—
705,487
Balance at December 31, 2022
71,256,118
$
—
—
—
1
—
69
—
—
—
2
—
—
71
—
—
—
—
71
—
—
61,602
11,316
13,520
(97)
—
—
—
—
—
(327,370)
—
—
—
—
—
—
—
—
—
—
—
—
—
(97)
(327,370)
61,602
11,317
13,520
$ 2,242,801
$
105
$ (1,843,475)
— $
— $
399,500
—
—
53,508
37,294
—
745
(1,303)
—
1,604,715
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,303)
1,604,715
53,508
37,296
— (16,216,411)
(802,486)
(802,486)
—
—
—
745
$ 2,334,348
$
(1,198) $
(238,760)
(16,216,411) $ (802,486) $
1,291,975
—
—
49,296
2,681
(11,337)
—
—
—
—
(231,801)
—
—
—
—
—
—
—
—
—
—
(11,337)
(231,801)
49,296
2,681
$ 2,386,325
$
(12,535) $
(470,561)
(16,216,411) $ (802,486) $
1,100,814
See accompanying Notes to Consolidated Financial Statements.
m
F-7
2022
2021
2020
$
(231,801) $
—
(231,801)
$
1,604,715
1,961,225
(356,510)
(327,370)
1,935
(329,305)
Agios Pharmaceuticals, Inc.
Consolidated Statements of Cash Flows
(In thousands) Years Ended December 31:
Operating activities
Net (loss) income
Less: Net income from discontinued operations
Net loss from continuing operations
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation expense
Net (accretion of discount) amortization of premium on marketable securities
Gain on sale of contingent payments
(Gain) loss on disposal of property and equipment
Non-cash operating lease expense
Changes in operating assets and liabilities:
Accounts receivable, net
Inventory
Other receivables
Prepaid expenses and other current and non-current assets
Accounts payable
Accrued expenses
Operating lease liabilities
Other liabilities
Net cash used in operating activities
Net cash used in operating activities - discontinued operations
Net cash used in operating activities
Investing activities
Purchases of marketable securities
Proceeds from maturities and sales of marketable securities
Proceeds from sale of contingent payments
Purchases of property and equipment
Proceeds from sale of equipment
Net cash provided by (used in) investing activities
Net cash provided by (used in) investing activities - discontinued operations
Net cash provided by investing activities
8,564
49,296
(1,198)
(127,853)
(48)
9,995
(2,206)
(8,492)
447
(176)
3,436
(1,617)
(10,828)
3,003
(309,478)
—
(309,478)
(1,030,781)
1,146,175
131,784
(4,881)
964
243,261
—
243,261
Financing activities
Payments on fiff nancing lease obligations
Purchase of treasury stock
Net proceeds from stock option exercises and employee stock purchase plan
Net cash provided by (used in) financing activities
Net cash provided by financing activities - discontinued operations
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
(331)
—
2,681
2,350
—
2,350
(63,867)
203,126
139,259
$
$
Supplemental disclosure of non-cash investing and financing transactions:
Additions to property and equipment in accounts payable and accrued expenses $
$
Cash taxes paid
$
Financing lease liabilities arising from obtaining financing lease assets
158
$
— $
— $
1,678
16,078
511
See accompanying Notes to Consolidated Financial Statements.
m
F-8
9,240
53,508
6,949
—
12
9,537
—
—
(4,378)
(26,846)
1,863
66
(7,527)
—
(314,086)
(93,234)
(407,320)
(1,378,221)
829,804
—
(5,741)
—
(554,158)
1,802,936
1,248,778
(578)
(802,486)
37,296
(765,768)
—
(765,768)
75,690
127,436
203,126
9,790
61,602
3,022
—
—
8,982
—
—
—
(3)
3,330
6,765
(8,127)
—
(243,944)
(46,815)
(290,759)
(557,030)
647,685
—
(14,106)
—
76,549
(803)
75,746
(336)
—
11,317
10,981
250,537
261,518
46,505
80,931
127,436
465
—
—
$
$
$
$
Agios Pharmaceuticals, Inc.
Notes to Consolidated Financial Statements
Note 1. Nature of Business
References to Agios
Throughout this Annual Report on Form 10-K, “the Company,” “we,” “us,” and “our,” and similar expressions, except where
the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our board of
directors” refers to the board of directors of Agios Pharmaceuticals, Inc.
Overview
We are a biopharmaceutical company committed to transforming patients’ lives through leadership in the field of cellular
metabolism, with the goal of creating differentiated, small molecule medicines for rare diseases. With a history of focused study
on cellular metabolism, we have a deep and mature understanding of this biology, which is involved in the healthy functioning
of nearly every system in the body. We accelerate the impact of our portfolio by cultivating connections with patient
communities, healthcare professionals, partners and colleagues to discover, develop and deliver potential therapies for rare
diseases. We are located in Cambridge, Massachusetts.
The lead product candidate in our portfolio, PYRUKYND® (mitapivat), is an activator of both wild-type and mutant pyruvate
kinase, or PK, enzymes for the potential treatment of hemolytic anemias. In February 2022, the Food and Drug Administration,
or FDA, approved PYRUKYND® for the treatment of hemolytic anemia in adults with PK deficiency in the United States. In
November 2022, we received marketing authorization from the European Commission for PYRUKYND® for the treatment of
PK deficiency in adult patients in the European Union, or EU. In December 2022, we received marketing authorization in Great
Britain for PYRUKYND® for the treatment of PK deficiency in adult patients under the European Commission Decision
Reliance Procedure. In addition, we are currently evaluating PYRUKYND® in clinical trials for the treatment of thalassemia,
sickle cell disease, or SCD, and in pediatric patients with PK deficiency. We are also developing AG-946, a novel PK activator,
for the potential treatment of lower-risk myelodysplastic syndrome, or LR MDS, and hemolytic anemias.
In addition to the aforementioned clinical development programs, we continue to invest in our late-stage research program
focused on advancing a phenylalanine hydroxylase, or PAH, stabilizer for the treatment of phenylketonuria, or PKU.
We are subject to risks common to companies in our industry including, but not limited to, uncertainties relating to conducting
clinical research and development, the manufacture and supply of products for clinical and commercial use, obtaining and
maintaining regulatory approvals and pricing and reimbursement for our products, market acceptance, managing global growth
and operating expenses, availability of additional capital, competition, obtaining and enforcing patents, stock price volatility,
dependence on collaborative relationships and third-party service providers, dependence on key personnel, potential litigation,
product liability claims and government investigations.
Sale of our Oncology Business to Servier
On March 31, 2021, we completed the sale of our oncology business to Servier Pharmaceuticals, LLC, or Servier, which
represented a discontinued operation. The transaction included the sale of our oncology business, including TIBSOVO®, our
clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs for a payment of
approximately $1.8 billion in cash at the closing, subject to certain adjustments, and a payment of $200.0 million in cash, if,
prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the FDA with an approved label
that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate
dehydrogenase 1 or 2 mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is
granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the
transaction through loss of exclusivity, and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of
vorasidenib through loss of exclusivity. Servier also acquired our co-commercialization rights for Bristol Myers Squibb’s
IDHIFA® and the right to receive a $25.0 million potential milestone payment under our prior collaboration agreement with
Celgene Corporation, or Celgene, and following the sale Servier will conduct certain clinical development activities within the
IDHIFA® development program.
We recorded income from royalties of approximately $9.9 million and $6.6 million on U.S. net sales of TIBSOVO® by Servier
in the royalty income from gain on sale of oncology business line item within the consolidated statements of operations, for the
years ended December 31, 2022 and December 31, 2021, respectively.
F-9
Sale of Contingent Payments
The consideration for the sale of our oncology business to Servier includes a royalty of 5% of U.S. net sales of TIBSOVO®
from the close of the transaction through loss of exclusivity, referred to as contingent payments. We recognize the contingent
payments in the royalty income from gain on sale of oncology business line item in our consolidated statement of operations in
the period when realizable. On October 27, 2022, we sold our rights to future contingent payments to entities affiliated with
Sagard Healthcare Partners, or Sagard, and recognized income of $127.9 million within the gain on sale of contingent payments
line item in our consolidated statements of operations for the year ended December 31, 2022. We retained our rights to the
potential milestone payment and royalties from Servier if vorasidenib is approved by the FDA.
Reclassifications
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.
Liquidity
On March 31, 2021, we completed the sale of our oncology business to Servier, and received approximately $1.8 billion in cash
at closing. In connection with the sale, 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 7.1 million shares of our
common stock held by certain subsidiaries of BMS for an aggregate purchase price of $344.5 million, or $48.38 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 could repurchase up to $600.0 million of shares of our common stock.
On October 5, 2021, we terminated our Rule 10b5-1 share repurchase program and on October 13, 2021 we entered into a Rule
10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization under
the Repurchase Program. We have not repurchased any shares of common stock in fiscal year 2022 and as of December 31,
2022 we have repurchased approximately 9.1 million shares of common stock for $458.0 million, or $50.35 per share, under the
Rule 10b5-1 repurchase plan. As of December 31, 2022, we have not repurchased any shares under the Rule 10b-18 repurchase
plan. In total, as of December 31, 2022, we repurchased 16.2 million shares of common stock for $802.5 million, or $49.49 per
share, under the Repurchase Program. We have paused our share repurchases for the foreseeable future.
On April 30, 2020, we entered into an at-the-market sales agreement, or the 2020 sales agreement, with Cowen & Company
LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up
to $250.0 million through Cowen pursuant to a universal shelf registration statement on Form S-3 filed with the SEC on April
30, 2020. As of December 31, 2022, $250.0 million in common stock remained available for future issuance under the 2020
sales agreement. On February 15, 2023, we delivered written notice to Cowen that we were terminating the 2020 sales
agreement, effective on February 22, 2023. As of the termination of the 2020 sales agreement, we had not sold any shares of
our common stock under the 2020 sales agreement.
As of December 31, 2022, we had cash, cash equivalents and marketable securities of $1.1 billion. Although we have incurred
recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and
marketable securities to be sufficient to fund current operations for at least the next twelve months from the issuance of the
financial statements. If we are unable to raise additional funds through equity or debt financings, we may be required to delay,
limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market
products or product candidates that we would otherwise prefer to develop and market ourselves.
Note 2. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries, Agios Securities
Corporation, Agios International Sarl (GmbH), Agios Germany GmbH, Agios Netherlands B.V., Agios Italy S.R.L., Agios
France SARL, and Agios Limited. All intercompany transactions have been eliminated in consolidation. The consolidated
financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or U.S. GAAP.
Use of estimates
The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that may
affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and
liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making
F-10
judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to
which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition,
including expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will
depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning
COVID-19 and any variant strains of the virus and the actions taken to contain the pandemic or treat COVID-19, as well as the
economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of
COVID-19 within our financial statements and there may be changes to those estimates in future periods. Actual results may
differ from these estimates.
Cash and cash equivalents
We consider highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash
equivalents are stated at fair value.
Accounts receivable, net
Our trade accounts receivable arise from product sales and represent amounts due from specialty distributors and specialty
pharmacy providers in the U.S. We monitor the financial performance and creditworthiness of our customers so that we can
properly assess and respond to changes in their credit profile. We reserve against these receivables for estimated losses that may
arise from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.
Inventory
Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out basis. Prior to the regulatory
approval of our product candidates, we incur expenses for the manufacture of drug product that could potentially be available to
support the commercial launch of those products. Until the date at which regulatory approval has been received or is otherwise
considered probable, we record all such costs as research and development expenses. Upon approval of our wholly owned
product, PYRUKYND®, by the FDA on February 17, 2022 for the treatment of hemolytic anemia in adults with PK deficiency
in the United States, we began to capitalize inventories of PYRUKYND®.
Revenue recognition
Under Accounting Standards Codification 606, Revenue from Contracts with Customers, or ASC 606, revenue is recognized
when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to
receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined
to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only
apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange
for the goods or services we transfer to the customer.
This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as
leases, insurance, collaboration arrangements and financial instruments.
Once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each
contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We
will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation
when (or as) the performance obligation is satisfied.
Product Revenue
We generate product revenue from sales of PYRUKYND® to a limited number of specialty distributors and specialty pharmacy
providers, or collectively, the Customers. These Customers subsequently resell PYRUKYND® to pharmacies or dispense
directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers
and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect
to the purchase of PYRUKYND®.
The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer
obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.
Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable
consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other
F-11
allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers
relating to the sale of our products.
Contractual Adjustments. We generally provide Customers with discounts,
including prompt pay discounts, and
allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related
product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain
Customers.
Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to
qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product
from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to
the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of
possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that
the related revenue is recognized, resulting in a reduction of product revenue.
Government Rebates. Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the
expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor
mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product
revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will
owe an additional liability under the Medicare Part D program.
Returns. We estimate the amount of product sales that may be returned by Customers and record this estimate as a
reduction of revenue in the period the related product revenue is recognized. We currently estimate product return
liabilities using the expected value method, based on available industry data, including our visibility into the inventory
remaining in the distribution channel.
Cost of sales
Cost of sales consists primarily of manufacturing costs for sales of PYRUKYND®. Based on our policy to expense costs
associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated
with product shipments of PYRUKYND® recorded during the twelve months ended December 31, 2022 were expensed prior
to February 17, 2022 and, therefore, are not included in costs of sales during the twelve months ended December 31, 2022.
Marketable securities
Marketable securities at December 31, 2022 and 2021 consisted of investments in U.S. Treasuries, government securities and
corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate
the appropriateness of such classifications at each balance sheet date. We classify our marketable securities as available-for-sale
pursuant to ASC 320, Investments – Debt and Equity Securities. Marketable securities are recorded at fair value. Unrealized
gains and losses are included as a component of accumulated other comprehensive (loss) income in the consolidated balance
sheets and statements of stockholders’ equity and a component of total comprehensive (loss) income in the consolidated
statements of comprehensive (loss) income, until realized. Realized gains and losses are included in investment income on a
specific-identification basis.
At December 31, 2022 and 2021, we held both current and non-current investments. Investments classified as current have
maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of one to two years, and
(ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and therefore
classified as available-for-sale.
We review marketable securities for impairment whenever the fair value of a marketable security is less than the amortized cost
and evidence indicates that a marketable security’s carrying amount is not recoverable. Unrealized losses are evaluated for
impairment under ASC 326, Financial Instruments - Credit Losses, to determine if the impairment is credit-related or
noncredit-related. Credit-related impairment
is recognized as an allowance on the balance sheet with a corresponding
adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive (loss) income, net of taxes.
Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the
severity of the impairment, collectability of the security, and any adverse conditions specifically related to the security, an
industry, or geographic area.
F-12
Fair value measurements
We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures,
establishes a fair value hier
archy for those instruments measured at fair value that distinguishes between assumptions based on
ff
market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or
inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in
pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement
date.
ff
Our financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction
price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable
market data. The pricing services utilize industry standard valuation models, including both income and market based
approaches, and observable market inputs to determine value. After completing our validation procedures, we did not adjust or
override any fair value measurements provided by the pricing services as of December 31, 2022 or 2021. Fair value information
for these assets, including their classification in the fair value hierarchy is included in Note 3, Fair Value Measurements.
There have been no changes to the valuation methods during the years ended December 31, 2022 and 2021. We evaluate
transfers betw
een levels at the end of each reporting period.
ff
The carrying amounts of other receivables, prepaid expenses and other current assets, accounts payable, and accrued expenses
approximate their fair values due to their short-term maturities.
Concentrations of credit risk
Financial instruments which potentially subject us to credit risk consist primarily of cash, cash equivalents, and marketable
securities. We hold these investments in highly rated financial institutions, and, by policy, limit the amounts of credit exposure
to any one financial institution. These amounts at times may exceed federally insured limits. We have not experienced any
credit losses in such accounts and do not believe we are exposed to any significant credit risk on these funds. We have no off-ff
balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts, or other hedging
arrangements.
Property and equipment
Property and equipment consist of laboratory equipment, computer equipment and software, leasehold improvements, furniture
and fixtures, and office equipment. Costs of major additions and betterment are capitalized; maintenance and repairs, which do
not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement or sale, the cost of
the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is
recognized.
ff
Property and equipment is stated at cost, and depreciated using the straight-line method over the estimated useful lives of the
respective assets:
Laboratory equipment
Computer equipment and software
Furniture and fixtures
Offff ice equipment
ff
Years
5
3
5
5
Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the
improvement.
rr
Impair
II
ment of long-lived assets
We periodically evaluate our long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and
Equipment. Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the
carrying amount of an asset may not be recovered. Recoverability of these as
sets is assessed based on the undiscounted
expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and
rr
F-13
economic projections, market trends and product development cycles. If impairments are identified, assets are written down to
their estimated fair value. We did not recognize any impairment charges through December 31, 2022.
Leases
We determine if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys
the right to control the use of an identified property or equipment for a period of time in exchange for consideration. If we can
benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or
if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the
arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the
lease consideration is allocated to the various components based on each of the component’s relative fair value.
Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent
our obligation to make lease payments arising from the leasing arrangement. Operating lease assets and operating lease
liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of
our leases do not provide an implicit rate, in determining the operating lease liabilities we use an estimate of our incremental
borrowing rate. The incremental borrowing rate is determined using two alternative credit scoring models to estimate our credit
rating, adjusted for collateralization. The calculation of the operating lease assets includes any lease payments made and
excludes any lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain
that we will exercise that option.
For operating leases, we record operating lease assets and lease liabilities in our consolidated balance sheets. Lease expense for
lease payments is recognized on a straight-line basis over the lease term. Short-term leases, or leases that have a lease term of
12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the
term of the lease.
We have not entered into any material short-term leases or financing leases as of December 31, 2022.
Research and development costs
Research and development costs, including those accrued as of each balance sheet date, are expensed as incurred. These costs
include salaries and personnel-related costs, consulting fees, fees paid for contract research services, fees paid to contract
research organizations, or CROs, and other third parties in connection with clinical trials and preclinical development activities,
fees paid to investigative sites in connection with clinical studies, the costs associated with the product manufacturing,
development, and distribution of clinical supplies, the costs of laboratory equipment and facilities, and other external costs.
Nonrefundable advance payments for goods or services to be received in the future for use in research and development
activities are deferred and capitalized. Additionally, there may be instances in which payments made to our vendors will exceed
the level of services provided, and result in a prepayment of the research and development expense. The capitalized amounts are
expensed as the related goods are delivered or the services are performed. We estimate the time period over which services will
be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the
level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.
Stock-based compensation
We account for stock-based compensation awards in accordance with ASC 718, Compensation –Stock Compensation, or ASC
718. For stock-based awards granted to employees, non-employees and members of the board of directors for their services and
for participation in our employee stock purchase plan, we estimate the grant date fair value of each option award using the
Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires us to make assumptions with
respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the
option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting
conditions, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line
basis over the requisite service period. For awards subject to both performance and service-based vesting conditions, we
recognize stock-based compensation expense over the remaining service period if the performance condition is considered
probable of achievement using management’s best estimates.
Income taxes
Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes, or ASC 740, which provides for
deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in our financial statements or tax returns. We determine our deferred tax assets
and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, which are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are
F-14
provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized.
We also account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist,
we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The
determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax
position as well as consideration of the available facts and circumstances.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and
other events and circumstances, and currently consists of net loss and unrealized gains and losses on available-for-sale
securities. Accumulated other comprehensive (loss) income consists entirely of unrealized gains and losses from available-for-
sale securities as of December 31, 2022 and 2021.
Net income (loss) per share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average shares outstanding during
the period, without consideration for common stock equivalents. Diluted net income (loss) per share is calculated by adjusting
weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined
using the treasury-stock method. For purposes of the dilutive net income (loss) per share calculation, stock options, restricted
stock units, or RSUs, performance-based stock units, or PSUs, and market-based stock units, or MSUs, for which the
performance and market vesting conditions, respectively, have been deemed probable, and employee stock purchase plan shares
are considered to be common stock equivalents but are excluded from the calculation of diluted net income (loss) per share as
their effect would be anti-dilutive.
We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common
stock equivalents are dilutive. The control number used is loss from continuing operations. The control number concept
requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing
operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since
we had a net loss from continuing operations for all periods presented, no dilutive effect has been recognized in the calculation
of income (loss) from discontinued operations per share or net income (loss) per share.
Segment and geographic information
Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker or decision-making group in making decisions on how to allocate
resources and assess performance. Our chief operating decision maker is the chief executive officer. Our chief operating
decision maker and we view our operations and manage our business as one operating segment.
Discontinued operations
We accounted for the sale of our oncology business in accordance with ASC 205, Discontinued Operations and Accounting
Standards Update, or ASU, No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components
of an Entity. We followed the held-for-sale criteria as defined in ASC 360, Property, Plant and Equipment, and ASC 205. ASC
205 requires that a component of an entity that has been disposed of or is classified as held for sale and has operations and cash
flows that can be clearly distinguished from the rest of the entity be reported as assets held for sale and discontinued operations.
In the period a component of an entity has been disposed of or classified as held for sale, the results of operations for the
periods presented are reclassified into separate line items in the consolidated statements of operations. Assets and liabilities are
also reclassified into separate line items on the related consolidated balance sheets for the periods presented. The statements of
cash flows for the periods presented are also reclassified to reflect the results of discontinued operations as separate line items.
ASU 2014-08 requires that only a disposal of a component of an entity, or a group of components of an entity, that represents a
strategic shift that has, or will have, a major effect on the reporting entity’s operations and financial results be reported in the
financial statements as discontinued operations. ASU 2014-08 also provides guidance on the financial statement presentations
and disclosures of discontinued operations.
Due to the sale of the oncology business during the first quarter of 2021, in accordance with ASC 205, we have classified the
results of the oncology business as discontinued operations in our consolidated statements of operations and cash flows for all
periods presented, and refer to Note 15, Discontinued Operations. All assets and liabilities associated with our oncology
business were therefore classified as assets and liabilities of discontinued operations in our consolidated balance sheets for the
periods presented. All amounts included in the notes to the consolidated financial statements relate to continuing operations
unless otherwise noted.
F-15
Treasury stock
rr
Treasury s
treasury srr
tock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as
tock.
Recent accounting pronouncements
In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new
guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments.
Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than
as a reduction in the amortized cost basis of the securities. The guidance is effective for fiscal years beginning after December
31, 2019, including interim periods within those years. The Company adopted this amendment as of January 1, 2020, which
eliminated the concept of other-than-temporary impairments and required credit losses on debt securities to be recorded through
an allowance for credit losses instead of as a reduction in the amortized cost basis of the secur
ities. Application of the
amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. There was no material
impact to the Company’s consolidated financial position, results of operation, or cash flows.
r
ff
ff
Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption
until a futur
e date are not expected to have a material impact on our financial statements upon adoption.
ff
Subsequent events
We considered events or transactions occurring after the balance sheet date, but pr
ior to the issuance of the consolidated
financial statements, for potential recognition or disclosure in our consolidated financial statements. All significant subsequent
ff
events have been properly disclosed in the consolidated financial statements.
ff
Note 3. Fair Value Measurements
The following table summarizes our cash equivalents and marketable securities measured at fair value and by level (as
described in Note 2. Summary of Significant Accounting Policies
) on a recurring basis as of December 31, 2022:
r
(In thousands)
Cash equivalents
Total cash equivalents
Marketable securities:
U.S. Treasuries
Government securities
Corporate debt securities
Total marketable securities
Level 1
Level 2
Level 3
Total
$
37,093
$
50,909
$
37,093
50,909
— $
—
88,002
88,002
—
—
—
—
84,596
331,443
541,695
957,734
—
—
—
—
84,596
331,443
541,695
957,734
Total cash equivalents and marketable securities
$
37,093
$ 1,008,643
$
— $ 1,045,736
There were no transfers between Level 1 and Level 2 and we had no financial assets or liabilities that were classified as Level 3
at any point during the year ended December 31, 2022.
F-16
Note 4. Marketable Securities
Marketable securities at December 31, 2022 consisted of the following:
ff
(In thousands)
Current:
U.S. Treasuries
Government securities
Corporate debt securities
Total Current
Non-current:
U.S. Treasuries
Government securities
rr
Corpor
ate debt securities
Total Non-current
Total marketable securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
68,175
$
220,901
363,263
652,339
17,418
117,475
183,037
317,930
$
970,269
$
3
8
1
12
4
7
76
87
99
$
(811) $
67,367
(5,289)
(2,391)
(8,491)
(193)
(1,659)
(2,291)
(4,143)
215,620
360,873
643,860
17,229
115,823
180,822
313,874
$
(12,634) $
957,734
Marketable securities at December 31, 2021 consisted of the following:
ff
(In thousands)
Current:
U.S. Treasuries
Government securities
Corporate debt securities
Total Current
Non-current:
U.S. Treasuries
Government securities
rr
Corpor
ate debt securities
Total Non-current
Total marketable securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
269,109
$
— $
(36) $
269,073
17,764
530,490
817,363
40,607
148,820
77,675
267,102
$ 1,084,465
$
1
3
4
—
—
—
—
4
(10)
(429)
(475)
(23)
(470)
(234)
(727)
17,755
530,064
816,892
40,584
148,350
77,441
266,375
$
(1,202) $ 1,083,267
There were no material realized gains or losses on marketable securities for the years ended December 31, 2022 and 2021.
At December 31, 2022 and 2021, we held 259 and 294 debt securities, respectively, that were in an unrealized loss position for
less than one year. We did not record an allowance for credit losses as of December 31, 2022 and December 31, 2021 related to
these securities. The aggregate fair value of debt securities in an unrealized loss position at December 31, 2022 and 2021 was
$868.2 million and $950.5 million, respectively. There were no individual securities that were in a significant unrealized loss
position as of December 31, 2022 and 2021. We regularly review the securities in an unrealized loss position and evaluate the
current expected credit loss by considering factors such as his
torical experience, market data, issuer-specific factors, and current
economic conditions. We do not consider these marketable securities to be impaired as of December 31, 2022 and 2021.
ff
F-17
Note 5. Inventory
Inventory, wrr
hich consists of commercial supply of PYRUKYND®, consisted of the following:
(In thousands)
Raw materials
Work-in-process
Finished goods
Total inventory
Note 6. Leases
December 31,
2022
December 31,
2021
$
$
— $
7,550
942
8,492 $
—
—
—
—
Our building leases are comprised of office and laboratory space under non-cancelable operating leases. These lease agreements
have remaining lease terms of five years and contain various clauses for renewal at our option. The renewal options were not
included in the calculation of the operating lease assets and the operating lease liabilities as the renewal options are not
reasonably certain of being exercised. The lease agreements do not contain residual value guarantees.
On April 11, 2019, we entered into an agreement to lease approximately 13,000 square feet of office space located at 38 Sidney
Street, Cambridge, Massachusetts, or the 38 Sidney Lease, with Thirty-Eight Sidney Street, LLC. The initial term of the 38
Sidney Lease commenced on May 1, 2019 and expires on February 29, 2028. At the end of the lease term, we have the option
to extend the 38 Sidney Lease for two consecutive terms of five years at fair market rent at the time of the extension. The 38
Sidney Lease provides us with the right to lease additional space within the 38 Sidney Street building and also includes rent
escalation clauses and a tenant improvement allowance of $1.0 million.
In connection with the 38 Sidney Lease, we also amended our existing building leases at 88 Sidney Street, Cambridge,
Massachusetts and at 64 Sidney Street, Cambridge, Massachusetts to extend the initial terms of those leases by approximately
three years through February 29, 2028. The amendments also provide us with the right to lease additional space at the 64
Sidney Street building. Our existing extension options for the 88 Sidney Street building and 64 Sidney Street building continue
as set forth in the existing leases for those buildings.
The components of lease expense and other information related to leases were as follows:
ff
(In millions)
Operating lease costs
2022
2021
2020
$
15,227 $
15,229 $
15,241
14,424
Cash paid for amounts included in the measurement of operating lease liabilities
17,035
14,411
We have not entered into any material short-term leases or financing leases as of December 31, 2022.
In arriving at the operating lease liabilities as of December 31, 2022, we applied the weighted-average incremental borrowing
rate of 5.7% frff om inception over a weighted-average remaining lease term of 5.2 years. In arriving at the operating lease
liabilities as of December 31, 2021, we applied the weighted-average incremental borrowing rate of 5.7% over a weighted-
average remaining lease term of 6.2 years.
F-18
As of December 31, 2022, undiscounted minimum rental commitments under non-cancelable leases, for each of the next fiveff
years and total thereafter, were as follows:
(In thousands)
2023
2024
2025
2026
2027
Thereafter
Undiscounted minimum rental commitments
Interest
Total operating lease liabilities
$
16,651
18,660
19,507
20,151
20,755
3,479
99,203
(13,544)
$
85,659
We provided our landlord a standby letter of credit of $2.9 million as security for our leases. We are not required to maintain
any cash collateral for the standby letter of credit.
In August 2021, we entered into a long-term sublease agreement for 13,000 square feet of the office space at 38 Sidney Street,
Cambridge, Massachusetts, with the term of the lease running through December 2024. In April 2022, we entered into a long-
term sublease agreement for 27,000 square feet of the office space at 64 Sidney Street, Cambridge, Massachusetts, with the
term of the lease running through April 2025. We recorded operating sublease income of $4.1 million and $0.5 million for the
years ended December 31, 2022 and December 31, 2021, respectively, in other income, net in the consolidated statements of
operations. We received a security deposit from our sublessee of approximately $1.1 million which is recorded within other
non-current assets on our consolidated balance sheet.
ff
As of December 31, 2022, the future minimum lease payments to be received under the long-term sublease agreements were as
ff
follows:
(In thousands)
2023
2024
2025
Total
Note 7. Accrued Expenses
Accrued expenses cons
r
isted of the following at December 31:
(In thousands)
Accrued compensation
Accrued research and development costs
r
Accrued pr
ofesff
sional fees
Accrued other
Total accrued expenses
Note 8. Product Revenue
4,329
4,459
1,101
9,889
$
2022
2021
$
18,105
$
19,818
8,425
2,435
1,385
5,980
2,335
3,834
$
30,350
$
31,967
We sell PYRUKYND®, our wholly owned product, to the Customers. The Customers subsequently resell PYRUKYND® to
pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements
with healthcare providers and payors that provide for government-
mandated and/or privately-negotiated rebates, chargebacks
and discounts with respect to the purchase of PYRUKYND®.
ff
The performance obligation related to the sale of PYRUKYND® is satisfied and revenue is recognized when the Customer
obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.
F-19
Product revenue, net, was as follows for the years ended December 31:
ff
(In thousands)
Product revenue, net
Reserves for Variable Consideration
2022
2021
2020
$
11,740
$
— $
—
Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable
e established and result from contractual adjustments, government rebates, returns and other
consideration for which reserves ar
allowances that are offff ered within the contr
acts with our Customers, healthcare providers, payors and other indirect customers
ff
relating to the sale of our products.
ff
The following table summarizes balances and activity in each of the product revenue allowance and reserve categories for the
year ended December 31, 2022:
(In thousands)
Balance at December 31, 2021
Current provisions relating to sales in the current year
Adjustments relating to prior years
Payments/returns relating to sales in the current year
Payments/returns relating to sales in the prior years
Balance at December 31, 2022
Contractual
Adjustments
Government
Rebates
Returns
Total
$
$
— $
— $
— $
497
—
(432)
—
65
912
—
(339)
—
133
—
—
$
573
$
133
$
—
1,542
—
(771)
—
771
There were no balances or activity related to product revenue allowance and reserve categories for the year ended December 31,
2021.
Total revenue-related reserves above, included in our consolidated balance sheets, are summarized as follows:
(In thousands)
Reduction of accounts receivable
Component of accrued expenses
Total revenue-related reserves
December 31,
2022
December 31,
2021
$
$
60 $
711
771 $
—
—
—
ff
The follow
ing table presents changes in our contract assets during the year ended December 31, 2022:
(In thousands)
Contract assets(1)
Accounts receivable, net
December 31,
2021
Additions
Deductions
December 31,
2022
$
— $
13,283
$
(11,077) $
2,206
(1) Additions to contract assets relate to amounts billed to Customers for product sales, and deductions to contract assets primarily relate to collection of
receivabla es during the reporting period.
There were no balances or activity related to contract assets for the year ended December 31, 2021.
Note 9. Share-Based Payments
Stock incentive plans
In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or
the 2013 Plan. The 2013 Plan became effective upon the closing of our initial public offering and provides for the grant of
, and other
incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, RSUs, PSUs
stock-based awards to employees, non-employees and non-employee directors. Following the adoption of the 2013 Plan, we
granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards
outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of December 31,
2022, the total number of shares reserved under the 2007 Plan and the 2013 Plan was 12,821,789, and we had 5,458,366 shares
available for future issuance under the 2013 Plan.
ff
F-20
The 2013 Plan provides for an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year
ending December 31, 2014 and continuing until the expiration of the 2013 Plan, equal to the lesser of (i) 2,000,000 shares of
common stock, (ii) 4% of the outstanding shares of common stock on such date or (iii) an amount determined by our Board of
Directors. On January 1, 2023, the annual increase for the 2013 Plan resulted in an additional 2,000,000 shares authorized for
issuance.
Stock options
ff
The follow
ing table summarizes the stock option activity of all stock incentive plans for the year ended December 31, 2022:
Outstanding at December 31, 2021
Granted
Exercised
Forfeited/Expired
ff
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Vested and expected to vest at December 31, 2022
Number of
Stock
Options
Weighted-
Average
Exercise
Price
4,798,826
$
1,850,093
(15,539)
(860,816)
5,772,564
3,497,660
5,772,564
$
$
$
58.51
28.89
11.50
60.91
48.81
58.24
48.81
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value (in
thousands)
6.24 $
4,697
6.50 $
4.84 $
6.50 $
5,362
3,141
5,362
The weighted-average grant date fair value of options granted was $15.64, $31.20 and $32.10 during the years ended
December 31, 2022, 2021 and 2020, respectively. The total intrinsic value of options exercised was $0.3 million, $8.5 million
and $10.4 million during the years ended December 31, 2022, 2021 and 2020, respectively.
At December 31, 2022, the total unrecognized compensation expense related to unvested stock option awards was $38.1
million, which we expect to recognize over a weighted-average period of approximately 2.71 years.
Restricted stock units
Upon vesting, each RSU entitles the holder to receive a specified number of shares of our common stock. The following table
presents RSU activity for the year ended December 31, 2022:
Unvested shares at December 31, 2021
Granted
Vested
Forfeited
Unvested shares at December 31, 2022
Number of
Stock Units
1,002,924
$
869,766
(531,304)
(223,465)
1,117,921
$
Weighted-Average
Grant Date
Fair Value
51.51
31.16
50.16
41.84
38.30
As of December 31, 2022, there was approximately $25.6 million of total unrecognized compensation expense related to RSUs,
which we expect to be recognized over a weighted-average period of 1.76 years.
F-21
Perforr mance-based stock units
At the achievement of the performance-based and service-based vesting criteria, each PSU entitles the holder to receive a
specified number of shares of our common stock. The following table pr
ff
2022:
esents PSU activity for the year ended December 31,
Unvested shares at December 31, 2021
Granted
Vested
Forfeited
Expired
Unvested shares at December 31, 2022
Number of
Stock Units
Weighted-Average
Grant Date
Fair Value
234,059
$
337,243
(53,777)
(47,190)
(40,092)
430,243
$
54.28
30.33
54.28
49.06
56.52
35.87
Stock-based compensation expense associated with these PSUs is recognized if the underlying performance condition is
considered probable of achievement using our management’s best estimates. As of December 31, 2022, there was no
unrecognized compensation expense related to PSUs with performance-based vesting criteria that are considered probable of
achievement that we expect to recognize. There is $15.4 million of total unrecognized compensation expense related to PSUs
with performance-based vesting criteria that are considered not probable of achievement.
Market-based stock units
We have issued certain equity awards that contain market based vesting conditions, in which shares of stock are earned at
vesting based on stock price performance. The fair value of MSUs are estimated using a Monte Carlo simulation model.
Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility and
the estimated period to achievement of the market condition.
The following table presents MSU activity for the year ended December 31, 2022:
ff
Unvested shares at December 31, 2021
Granted
Unvested shares at December 31, 2022
Number of
Stock Units
Weighted-Average
Grant Date
Fair Value
42,695
—
42,695
$
$
41.50
—
41.50
As of December 31, 2022, there was no remaining unrecognized compensation expense related to MSUs.
2013 Employee Stock Purchase Plan
In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase
Plan, or the 2013 ESPP. On January 1, 2023, the annual increase for the 2013 ESPP resulted in an additional 509,091 shares
authorized for iss
uance. We issued 104,867 shares and 94,888 shares during the years ended December 31, 2022 and 2021,
respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an
aggregate of 1,854,545 shares of our common stock. As of December 31, 2022, we had 1,289,780 shares available for future
issuance under the 2013 ESPP.
ff
F-22
SS
Stock-bas
ed compensation expense
During the years ended December 31, 2022, 2021 and 2020, we recorded stock-based compensation expense for employee and
non-employee stock options, RSUs, PSUs, ESPP shares and other stock-based awards. Stock-based compensation expense by
award type included within the consolidated statements of operations is as follows:
(In thousands)
Stock options
Restricted stock units
Performance-based stock units
Employee Stock Purchase Plan
Other stock awards
2022
2021
2020
$
23,731 $
30,985 $
21,670
2,919
976
—
21,510
—
1,013
—
37,705
19,893
1,760
1,463
781
Total stock-based compensation expense
$
49,296 $
53,508 $
61,602
Expenses related to equity-based awards were allocated as follows in the consolidated statements of operations:
(In thousands)
Research and development expense
Selling, general and administrative expense
Total stock-based compensation expense
2022
2021
2020
$
$
20,988 $
24,527 $
28,308
28,981
49,296 $
53,508 $
27,119
34,483
61,602
No related tax benefits were recognized for the years ended December 31, 2022, 2021 and 2020.
The fair value of each stock option granted to employees and non-employees is estimated on the date of grant using the Black-
Scholes option-pricing model. The following table summarizes the weighted average assumptions used in calculating the grant
date fair value of the awards:
Risk-free interest rate
Expected dividend yield
Expected term (in years)
Expected volatility
Expected term
2022
2021
2020
2.55 %
—
6.03
0.72 %
—
6.05
1.24 %
—
6.05
55.30 %
61.72 %
73.80 %
We use the “simplified method” as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107,
Share Based Payments, to estimate the expected term of stock option grants. Under this approach, the weighted-average
expected life is presumed to be the average of the contractual term of ten years and the weighted-average vesting term of the
stock options, taking into consideration multiple vesting tranches. We utilize this method due to lack of historical data and the
plain-vanilla nature of our share-based awards.
Volatility
The expected volatility has been determined using Agios' historical volatilities for a period equal to the expected term of the
option grant.
ff
Risk-free rate
The risk-frff ee rate is based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of
the options being valued.
Dividends
We have never paid, and do not anticipate paying, any cash dividends in the foreseeable future, and, therefore, use an expected
dividend yield of zero in the option-pricing model.
Forfeitures
ff
ff
We account for forfeitures as they occur and, theref
ff
ore, do not estimate forfeitures
.
F-23
Note 10. Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average shares outstanding during
the period, without consideration for common stock equivalents. Diluted net income (loss) per share is calculated by adjusting
weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined
using the treasury stock method. For purposes of the dilutive net income (loss) per share calculation, stock options, RSUs, PSUs
and MSUs for which the perforff mance and market vesting conditions, respectively, have been deemed probable, and 2013 ESPP
shares are considered to be common stock equivalents, while PSUs and MSUs with performance and market vesting conditions,
respectively, that were not deemed probable as of December 31, 2022 are not considered to be common stock equivalents.
ff
We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common
stock equivalents are dilutive. The control number used is loss from continuing operations. The control number concept
requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing
operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since
we had a net loss from continuing operations for all periods presented, no dilutive effect has been recognized in the calculation
of income (loss) frff om discontinued operations per share or net income (loss) per share. Basic and diluted net loss per share were
the same for all periods presented.
ff
The follow
ff
common stockholders for the per
ff
ing common stock equivalents were excluded from the calculation of diluted net loss per share applicable to
iods indicated because including them would have had an anti-dilutive effect:
Stock options
Restricted stock units
Employee Stock Purchase Plan shares
Total
Note 11. Income Taxes
Years ended December 31,
2022
5,772,564
1,117,921
42,026
6,932,511
2021
4,798,826
1,002,924
39,864
5,841,614
2020
6,143,046
1,284,378
46,439
7,473,863
The domestic and forff eign components of loss from continuing operations before income taxes are as follows:
(In thousands)
Domestic
Foreign
Total
2022
2021
2020
(231,767) $
(356,665) $
(330,669)
(34)
155
1,364
(231,801) $
(356,510) $
(329,305)
$
$
We did not have any material provision for income taxes for the years ended December 31, 2022, 2021 and 2020.
A reconciliation of the expected income tax benefit (expense) computed using the federal statutory income tax rate to our
effective income tax rate is as follows for the years ended December 31, 2022, 2021 and 2020:
Income tax benefit computed at federal statutory tax rate
State taxes, net of federal benefit
Change in valuation allowance
General business credits and other credits
Permanent differences and other adjustments
Stock based compensation
Total
2022
2021
2020
21.0 %
2.9 %
(25.7)%
5.2 %
(2.3)%
(1.1)%
— %
21.0 %
2.6 %
(24.5)%
5.3 %
(3.9)%
(0.5)%
— %
21.0 %
2.5 %
(28.2)%
7.0 %
(1.6)%
(0.7)%
— %
F-24
ff
Deferred income taxes reflect the net tax effects of temporary diff
ff
erences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax
assets and liabilities for the years ended December 31, 2022 and 2021 are as follows:
ff
(In thousands)
Deferred tax assets:
Net operating loss carryfrr orwards
ff
Tax credit carryforwards
Purchased intangible assets
Stock-based compensation
Operating lease liability
Non-deductible accruals and reserves, including inventory
Section 174 R&D expense
Total deferred tax assets
Depreciation and amortization
Operating lease right of use asset
Less: valuation allowance
Net deferred taxes
2022
2021
$
32,907 $
163,780
11,583
26,236
21,042
3,992
56,565
316,105
(3,767)
(16,345)
(295,993)
39,186
152,128
12,150
27,217
22,963
4,033
—
257,677
(3,168)
(18,031)
(236,478)
$
— $
—
ff
The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and experimental expenditures under
section 174 for tax years beginning after December 31, 2021. This rule became effective f
ff
or the Company during the year
ending December 31, 2022 and resulted in the capitalization of research and development costs of $261.4 million. We will
amortize these costs for tax purposes over 5 years if the research and development was perf
ff
ormed in the U.S. and over 15 years
if the research and development was performed outside the U.S.
ff
As of December 31, 2022, we had net operating loss carryforwards, or NOLs, available to reduce state and foreign income taxes
of approximately $1.2 billion and $65.2 million, respectively. At December 31, 2022, we also had available research and
development tax credits for f
ff
ederal and state income tax purposes of approximately $16.9 million and $25.7 million,
respectively. If not utilized, the credits begin to expire in 2039 and 2027 for federal and state income tax purposes, respectively.
We engaged in clinical testing activities and incurred expenses that qualify for the federal orphan drug tax credit. At
December 31, 2022, we had available orphan drug tax credits for federal purposes only of approximately $126.5 million. If not
utilized, the orphan drug credits begin to expire in 2035.
ff
As provided by Section 382 of the Internal Revenue Code of 1986, or Section 382, and similar state provisions, utilization of
NOLs and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations that
have previously occurred or that could occur in the future. Ownership changes may limit the amount of NOLs and tax credit
carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership
change, as defined by Section 382, results from transactions that increase the ownership of five percent stockholders in the
stock of a corporation by more than 50 percent in the aggregate over a three year period. We completed a review of our changes
in ownership through December 31, 2022 and determined that transactions have resulted in no ownership changes during the
year ended December 31, 2022, as defined by Section 382. The impact of the historical ownership changes has been reflected in
our deferred tax assets in the table above.
ff
As required by ASC 740, we have evaluated the positive and negative evidence bearing upon the realizability of our deferred
tax assets. Based on the weight of available evidence, both positive and negative, we recorded a valuation allowance of $296.0
million and $236.5 million as of December 31, 2022 and December 31, 2021, respectively, because we have determined that it
is more likely than not that these assets will not be fully realized. The valuation allowance increased by $59.5 million for the
year ended December 31, 2022 primarily due to the Section 174 R&D expense capitalization and decreased by $358.3 million
for the year ended December 31, 2021 primarily due to the utilization of net operating losses and tax credits.
F-25
ff
The follow
ing table presents our change in valuation allowance for the years ended December 31, 2022 and, 2021:
(in thousands)
Valuation allowance at the beginning of the year
ff
Increase (decrease) for the current period
Valuation allowance at the end of the year
2022
2021
$
$
236,478 $
594,752
59,515
(358,274)
295,993 $
236,478
As of December 31, 2022, the unremitted earnings of our foreign
subsidiaries are not material. We have not provided for U.S.
income taxes or foreign withholding taxes on these earnings as it is our current intention to permanently reinvest these earnings
outside the U.S. The tax liability on these earnings is also not material. Events that could trigger a tax liability include, but are
not limited to, distributions, reorganizations or restructurings and/or tax law changes.
ff
We apply the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. Our reserves related to
taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more
likely than not to be realized following resolution of any potential contingencies present related to the tax benefit.
The following table presents our unrecognized tax benefits activity for the years ended December 31, 2022 and 2021:
(In thousands)
Unrecognized tax benefits at the beginning of the year
Gross increases - current period tax positions
Unrecognized tax benefits at the end of the year
2022
2021
$
$
24,220 $
1,970
26,190 $
21,131
3,089
24,220
We will recognize interest and penalties related to uncertain tax positions above the line as an expense to continuing operations.
As of December 31, 2022 and 2021, we had no accrued interest or penalties related to uncertain tax positions and no such
amounts have been recognized. If all of the Company’s unrecognized tax benefits as of December 31, 2022 were to become
recognizable in the future, we would record $26.2 million of unrecognized tax benefits. The uncertain tax position does not
impact our effective income tax rate due to the full valuation allowance.
ff
rr
We are subject to taxation in the United States, Switzerland, Netherlands, Germany, Italy and France. The statute of limitations
for assessment by the IRS and state tax authorities is open for tax years ending December 31, 2022, 2021, 2020, and 2019,
although carryforward attributes that wer
e generated for tax years prior to 2019 may still be adjusted upon examination by the
IRS or state tax authorities if they either have been, or will be, used in a future period. The statute of limitations for assessment
in Switzerland remains open for tax years ending December 31, 2022, 2021, 2020, and 2019. The Company’s subsidiaries in the
Netherlands and Germany were incorporated in 2019 and therefore the statute of limitations for assessment that remain open in
these jurisdictions are for the tax years ending December 31, 2022, 2021, 2020 and 2019. The Company’s subsidiaries in Italy
and France were incorporated in 2020 and therefore the statute of limitations for assessment that remain open in these
jurisdictions are for the tax years ending December 31, 2022, 2021 and 2020. There are currently no federal, state or foreign
audits in progress.
ff
ff
As of December 31, 2022 and 2021, we had an income tax receivable of $0.3 million and $2.9 million, respectively, recorded
within prepaid expenses and other assets.
F-26
Note 12. Property and Equipment, net
Property and equipment, net consisted of the following at December 31:
ff
(In thousands)
Laboratory equipment
Computer equipment and softwar
ff
e
Leasehold improvements
Furniture and fixtur
ff
es
Office equipment
Construction in pr
r
ogress
Total property and equipment
Less: accumulated depreciation
Total property and equipment, net
2022
2021
$
23,182
$
6,179
37,277
3,514
2,248
657
73,057
(50,070)
22,165
6,913
32,726
3,035
1,690
7,368
73,897
(44,974)
$
22,987
$
28,923
Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $8.4 million, $8.8 million and $9.4 million,
respectively.
Note 13. Common Stock
We are authorized to issue 125,000,000 shares of our common stock. Holders of common stock are entitled to one vote per
share. Additionally, holders of common stock are entitled to receive dividends, if and when declared by our board of directors,
and to share ratably in our assets legally available for distribution to our shareholders in the event of liquidation.
Note 14. Share Repurchase Program
On March 25, 2021, we announced that our board of directors authorized the Repurchase Program for the repurchase of up to
$1.2 billion of our outstanding shares of common stock. On March 31, 2021, in connection with the Repurchase Program, we
entered into a definitive share repurchase agreement with BMS to repurchase 7.1 million shares of our common stock held by
certain subsidiaries of BMS for an aggregate purchase price of $344.5 million, or $48.38 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 to which
we may repurchase up to $600.0 million of shares of our common stock. As of December 31, 2022, we have repurchased
approximately 9.1 million shares of common stock for $458.0 million, or $50.35 per share, under the Rule 10b5-1 repurchase
plan. In total, as of December 31, 2022, we have repurchased 16.2 million shares of common stock for $802.5 million, or
$49.49 per share, under the Repurchase Program.
On October 5, 2021, we terminated our Rule 10b5-1 share repurchase plan and on October 13, 2021, we entered into a Rule
10b-18 repurchase plan that allows us to conduct open market repurchases over time up to our remaining authorization under
the Repurchase Program. We have paused our share repurchases for the foreseeable future.
Repurchased shares are held as treasury stock until they are retired or re-issued. Treasury stock purchases are accounted for
under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Repurchases of our common
stock are accounted for as of the settlement date. There were no retirements or re-issuances of treasury stock during the year
ended December 31, 2022.
Note 15. Discontinued Operations
ff
On March 31, 2021, we completed the sale of our oncology business to Servier. We determined the sale of the oncology
business represented a strategic shift that had a major effect on our business and ther
efore met the criteria for classification as
discontinued operations at March 31, 2021. Accordingly, the oncology business is reported as discontinued operations in
accordance with ASC 205-20, Discontinued Operations. The related assets and liabilities of the oncology business were
sets and liabilities of discontinued operations in the consolidated balance sheets and the results of operations
classified as as
frff om the oncology business as discontinued operations in the consolidated statements of operations. Applicable amounts in
prior years have been recast to conform to this discontinued operations presentation. We recognized a gain on the sale of the
oncology business upon closing.
ff
F-27
ff
The follow
ing table presents the net liabilities transferred for the sale of the oncology business at March 31, 2021:
in thousands)
Assets
Current assets:
Accounts receivable, net
Collaboration receivable – related party
Collaboration receivable – other
Inventory
Prepaid expenses and other current assets
Total current assets of discontinued operations
Other non-current assets
Total assets of discontinued operations
Liabilities
Current liabilities:
Accounts payable
Accrued expenses
Total current liabilities of discontinued operations
Liability related to the sale of future revenue, net of debt issuance costs
Total liabilities of discontinued operations
Net liabilities distributed to Servier
ff
The follow
ing table presents the gain on the sale for the year ended December 31, 2021:
(in thousands)
Cash proceeds
Less: transaction and insurance costs
Plus: net liabilities distributed, including working capital adjustment
Gain on sale, pre-tax
Income tax expense
Gain on sale, net of tax
March 31, 2021
$
25,386
2,253
2,438
16,190
7,125
53,392
2,234
55,626
4,245
30,288
34,533
264,281
298,814
$
$
$
(243,188)
December 31,
2021
$
1,802,936
(53,573)
239,770
1,989,133
(12,799)
$
1,976,334
As of December 31, 2022 and December 31, 2021, there were no assets or liabilities classified as discontinued operations.
F-28
ff
The follow
ing table presents the financial results of the discontinued operations:
(in thousands)
Revenues:
Product revenue, net
Collaboration revenue – related party
Collaboration revenue – other
Royalty revenue – related party
Total revenue
Cost and expenses:
Cost of sales
Research and development
Selling, general and administrative
Total cost and expenses
(Loss) income from discontinued operations
Non-cash interest expense for the sale of future revenue
ff
Gain on the sale of the oncology business
Income from discontinued operations, pre-tax
Income tax expense
Net income from discontinued operations
2021
2020
$
36,909 $
121,089
1,350
491
2,659
68,274
3,571
10,262
41,409
203,196
706
41,564
8,551
50,821
(9,412)
(5,697)
1,989,133
1,974,024
(12,799)
2,805
146,659
33,965
183,429
19,767
(17,832)
—
1,935
—
$
1,961,225 $
1,935
In accordance with ASC 205-20, only expenses specifically identifiable and related to a business to be disposed may be
presented in discontinued operations. As such, the research and development, marketing, selling and general and administrative
expenses in discontinued operations include corporate costs incurred directly to solely support our oncology business.
ff
We also entered into a Transition Services Agreement with Servier, through which we provided transitional services related to
discovery, clinical development, technical operations, commercial and general and administrative related activities through
March 31, 2022.
The milestone payment for approval of vorasidenib and royalty payments related to vorasidenib and TIBSOVO® represent
contingent consideration. Contingent consideration has been accounted for as a gain contingency in accordance with ASC 450,
Contingencies, and will be recognized in earnings in the period when realizable. As described in Note 1, Nature of Business, on
October 27, 2022, we sold our rights to future contingent payments to entities affiliated with Sagard and recognized income of
$127.9 million within the gain on sale of contingent payments line item in our consolidated statements of operations for the
year ended December 31, 2022.
Note 16. Commitments and Contingent Liabilities
Manufacturing Commitments
We are party to various agreements with contract manufacturing organizations that we ar
e not contractually able to terminate
for convenience and avoid any and all future obligations to the vendors. Under such agreements, we are obligated to make
certain minimum payments, with the exact amounts in the event of termination to be based on the timing of the termination and
the exact terms of the agreement.
ff
Legal Contingencies
From time to time, we may be involved in disputes and legal proceedings in the ordinary course of business. These proceedings
may include allegations of infrff ingement of intellectual property, employment or other matters. We do not have any ongoing
legal proceedings that, based on our estimates, could have a material effect on our consolidated financial statements.
Note 17. Defined Contribution Benefit Plan
We sponsor a 401(k) retirement plan, in which substantially all of our full-time employees are eligible to participate.
Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. We will
F-29
make matching contributions equal to 100% of the employee’s contributions, subject to a maximum of 4% of eligible
compensation.
F-30
Executive Leadership
2022 Annual Report
Brian Goff
Chief Executive Officer
Jim Burns
Chief Legal Officer
Sarah Gheuens, M.D., Ph.D.
Chief Medical Officer,
Head of R&D
Cecilia Jones
Chief Financial Officer
Ellen LoPresti
Chief People Officer
Tsveta Milanova
Chief Commercial Officer
Charlie Newman
Chief Business Officer
Clive Patience, Ph.D.
Chief Technical
Operations Officer
Board of Directors
Rahul Ballal, Ph.D.
CEO, Mediar
Jacqualyn Fouse, Ph.D.
Board Chair, Agios
Paul Clancy
Former EVP & CFO, Alexion
Brian Goff
CEO, Agios
Kaye Foster
Former SVP Global Human
Resources, Onyx Pharmaceuticals
Maykin Ho, Ph.D.
Retired Partner,
Goldman Sachs Group
John Maraganore, Ph.D.
Lead Independent Director, Agios;
Former CEO, Alnylam
Pharmaceuticals
David Scadden, M.D.
Hematologist/Oncologist;
Professor, Harvard
David Schenkein, M.D.
General Partner, GV
Cynthia Smith
Former Chief Commercial
Officer, ZS Pharma
Annual Meeting
Transfer Agent
SEC form 10-K
The Annual Meeting of Stockholders
will be held at 9:00 a.m. EDT on June
13, 2023. You may register to attend the
Annual Meeting virtually via the Internet
at www.proxydocs.com/AGIO, where
you will be able to vote electronically
and submit questions.
Independent Auditors
PricewaterhouseCoopers LLP
Investor Inquiries
Holly Manning
617-649-8600
IR@agios.com
The transfer agent is responsible,
among other things, for handling
stockholder questions regarding lost
stock certificates, address changes,
including duplicate mailings, and
changes in ownership or name in which
shares are held. These requests may
be directed to the transfer agent at
the following address:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
www.astfinancial.com
A copy of Agios’ annual report on Form
10-K filed with the Securities and Exchange
Commission is available free of charge
from the company’s Investor Relations
Department by calling 617-649-8600,
sending a request by email to Holly
Manning at IR@agios.com
or sending a written request to:
Investor Relations
Agios Pharmaceuticals, Inc.
88 Sidney Street
Cambridge, MA 02139
Corporate Headquarters
Agios Pharmaceuticals, Inc.
88 Sidney Street
Cambridge, MA 02139-4169
www.agios.com