Blueprint Medicines Corporation
45 Sidney Street
Cambridge, MA 02139
(617) 374-7580
blueprintmedicines.com
NASDAQ: BPMC
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ANNUAL
REPORT2017
NASDAQ: BPMC
Dear Stockholders
At Blueprint Medicines, we are guided by a singular vision: delivering
transformative, highly selective kinase medicines to people with
genomically defined cancers and rare diseases.
In 2017, we moved closer to realizing this vision for Blueprint Medicines as we demonstrated
solid execution across our clinical and research portfolio. We continued to advance our three
lead clinical candidates in five distinct patient populations, further validating the power of the
Blueprint Medicines platform. Our progress speaks to the strength of our scientific approach
and our ability to design and quickly execute clinical trials that enable rapid proof-of-concept,
as well as the potential for highly selective kinase medicines to radically alter the treatment
landscape for patients with cancer and rare genetic diseases.
At the beginning of 2017, we set out four key areas of focus for the year ahead – progressing
our ongoing Phase 1 clinical trials; defining the clinical and regulatory paths forward for
avapritinib and BLU-554; further maximizing the value of our platform; and continuing to
evaluate business development opportunities. Our accomplishments in 2017 represent
significant progress against these goals.
In the fourth quarter, we presented clinical data from two Phase 1 clinical trials of avapritinib,
in patients with advanced gastrointestinal stromal tumors (GIST) – the NAVIGATOR trial –
and advanced systemic mastocytosis (SM) – the EXPLORER trial. In both diseases, our data
demonstrated remarkable clinical activity, which we believe provides a strong foundation
for continued rapid development of avapritinib in patients with GIST and SM and opens the
potential for avapritinib to be explored in a wide range of other diseases in which subsets
of patients have KIT or PDGFRα mutations.
Earlier in 2017, we announced updated data from our ongoing clinical trial of BLU-554 in
patients with advanced hepatocellular carcinoma (HCC), which showed that BLU-554 may
offer a meaningful new treatment option for patients with FGFR4-driven HCC, for whom
there are no biomarker-targeted therapies currently available.
Executive Leadership
Jeff Albers
Chief Executive Officer and President
Anthony L. Boral, M.D., Ph.D.
Chief Medical Officer
Marion Dorsch, Ph.D.
Chief Scientific Officer
Board of Directors
Daniel Lynch
Chairman, Blueprint Medicines Corporation
Jeff Albers
Chief Executive Officer and President,
Blueprint Medicines Corporation
Alexis Borisy
Partner, Third Rock Ventures
Lonnel Coats
Chief Executive Officer and President,
Lexicon Pharmaceuticals, Inc.
Debbie Durso-Bumpus
Senior Vice President,
Human Resources
Kate Haviland
Chief Business Officer
Mike Landsittel
Vice President, Finance
Christoph Lengauer, Ph.D.
Executive Vice President
Tracey L. McCain, Esq.
Executive Vice President,
Chief Legal and Compliance Officer
Christopher K. Murray, Ph.D.
Senior Vice President, Technical Operations
George D. Demetri, M.D.
Professor of Medicine,
Harvard Medical School,
and Director of the Center
for Sarcoma and Bone Oncology,
Dana-Farber Cancer Institute
Nicholas Lydon, Ph.D.
Co-Founder,
Blueprint Medicines Corporation
Charles A. Rowland, Jr.
Former Chief Executive Officer,
Aurinia Pharmaceuticals Inc.
Mark Goldberg, M.D.
Associate Professor of Medicine,
Harvard Medical School
Lynn Seely, M.D.
Chief Executive Officer and President,
Myovant Sciences, Inc.
Annual Meeting of Stockholders
SEC Form 10-K
Transfer Agent
The 2018 annual meeting of
stockholders will be held on Wednesday,
June 20, 2018 at 3:00 p.m. EDT at
Blueprint Medicines’ headquarters, which
are located at 45 Sidney Street,
Cambridge, MA 02139.
Stock Listing
NASDAQ: BPMC
Independent Auditors
Ernst & Young LLP
A copy of Blueprint Medicines’ 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) 714-6674, emailing
ir@blueprintmedicines.com or
sending a written request to:
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:
Investor Relations
Blueprint Medicines Corporation
45 Sidney Street
Cambridge, MA 02139
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
www-us.computershare.com/contactus
Cautionary Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, statements regarding plans
and timelines for the clinical development of avapritinib, BLU-554, BLU-667 and BLU-782; the potential benefits of Blueprint Medicines’ current and future drug candidates in treating patients; plans
and timelines for regulatory submissions, filings or discussions; plans and timelines for current or future discovery programs; Blueprint Medicines’ future financial performance; expectations
regarding potential milestones in 2018; expectations regarding Blueprint Medicines’ existing cash, cash equivalents and investments; and Blueprint Medicines’ strategy, business plans and focus.
The words “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “target” and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any forward-looking statements in this annual report are based on
management’s current expectations and beliefs and are subject to a number of risks, uncertainties and important factors that may cause actual events or results to differ materially from those
expressed or implied by any forward-looking statements contained in this annual report, including, without limitation, risks and uncertainties related to the delay of any current or planned clinical
trials or the development of Blueprint Medicines’ drug candidates, including avapritinib, BLU-554, BLU-667 and BLU-782; Blueprint Medicines’ advancement of multiple early-stage efforts;
Blueprint Medicines’ ability to successfully demonstrate the safety and efficacy of its drug candidates; the preclinical and clinical results for Blueprint Medicines’ drug candidates, which may not
support further development of such drug candidates; actions of regulatory agencies, which may affect the initiation, timing and progress of clinical trials; Blueprint Medicines’ ability to develop
and commercialize companion diagnostic tests for its current and future drug candidates, including companion diagnostic tests for BLU-554 for FGFR4-driven HCC, avapritinib for PDGFRα
D842V-driven GIST and BLU-667 for RET-driven NSCLC; and the success of Blueprint Medicines’ cancer immunotherapy collaboration with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
These and other risks and uncertainties are described in greater detail in the section entitled “Risk Factors” in Blueprint Medicines’ Annual Report on Form 10-K for the year ended December 31,
2017, as filed with the Securities and Exchange Commission (SEC) on February 21, 2018, and other filings that Blueprint Medicines has made or may make with the SEC in the future. Any
forward-looking statements contained in this annual report represent Blueprint Medicines’ views only as of April 27, 2018 and should not be relied upon as representing its views as of any
subsequent date. Except as required by law, Blueprint Medicines assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes
available in the future.
© Blueprint Medicines Corporation April 27, 2018 In addition, we continued to expand our clinical-stage pipeline in 2017. In March, we enrolled the first patient
in our Phase 1 clinical trial of BLU-667 – the ARROW trial – which targets RET mutations and fusions in
non-small cell lung cancer, medullary thyroid cancer and other advanced solid tumors. About one year after
dosing our first patient, we presented proof-of-concept data in a clinical trials plenary session at the American
Association for Cancer Research (AACR) Annual Meeting in April 2018. The data from the dose escalation
portion of the Phase 1 study demonstrated encouraging proof-of-concept for BLU-667, with broad antitumor
activity across multiple tumor types and RET genotypes with a favorable safety profile.
Finally, in the fourth quarter, we announced the nomination of BLU-782 as
our development candidate for the treatment of fibrodysplasia ossificans
progressiva (FOP), a severe, ultra-rare bone disorder, which is caused
by mutations in the ALK2 gene. We plan to report preclinical data
supporting the development of BLU-782 in FOP later in 2018.
Our progress speaks to the strength
of our scientific approach and our
ability to design and quickly execute
clinical trials that enable rapid
proof-of-concept.
Since our founding in 2011, we have utilized our targeted strategy,
proprietary library and exceptional team to build a portfolio of potentially
transformative experimental medicines. With clinical proof-of-concept for three of these
therapeutic candidates in five patient populations, we believe our portfolio demonstrates
the power of our differentiated drug discovery capability enabling the rapid, reliable and
reproducible design of highly selective molecules. In 2018, we anticipate our vision for
this portfolio to come into clearer focus: we expect to have four therapeutic candidates
in clinical development and up to nine discovery programs underway. We anticipate a
continued cadence of important data disclosures for each of our clinical-stage programs
throughout 2018, as well as increased clarity on potential registration pathways as we
look to rapidly advance our therapeutic candidates.
Jeff Albers
President and CEO
We have continued to maintain a strong financial position to enable us to advance our existing clinical
programs, while also investing in discovery efforts. We ended 2017 with $673.4 million in cash, cash
equivalents and investments, which included an aggregate of $541.3 million in net proceeds from
underwritten public offerings in April and December 2017. Based on our current operating plans, we
expect that our existing cash runway will be sufficient to enable us to fund operating expenses and
capital expenditure requirements into the middle of 2020.
In addition, we continue to explore a range of strategic collaboration opportunities across our portfolio.
Our disciplined business development strategy focuses on identifying partnership opportunities that can
accelerate our development programs or expand our global reach, with the goal of bringing our drug
candidates more rapidly into the hands of patients and physicians worldwide.
At Blueprint Medicines, we challenge each other to find creative solutions to difficult scientific questions
and to push the boundaries of modern medicine to improve the lives of patients. In 2017, we continued to
enhance our core capabilities, welcoming a senior vice president of technical operations to our executive
management team and hiring new employees across our business who bring a diversity of experiences and
backgrounds. Collectively, our team thrives in Blueprint Medicines’ collaborative, fast-paced culture defined
by a shared desire to improve patients’ lives.
Looking back on all that we’ve accomplished this year, I would like to thank all our employees, scientific
and clinical collaborators, board members, and stockholders for supporting our mission and our work.
Most importantly, we’d like to thank the patients, families and physicians who participate in our clinical
trials -- their trust and support is critical for enabling our success.
We look forward to building on our continued progress in 2018 and to updating you as we advance closer
to our vision of dramatically improving the lives of patients with genomically defined diseases.
Sincerely,
Jeffrey W. Albers
President and Chief Executive Officer
Our lead therapeutic candidate: avapritinib
Rapidly advancing clinical development in genomically defined patients
Highly selective KIT and PDGFRα inhibitor
Compelling datasets in patients with GIST
and SM reported in 2017
Breakthrough Therapy Designation
granted for PDGFRα D842V–driven GIST
Further data and regulatory updates
expected in 2018
Kinome illustration reproduced courtesy of Cell Signaling Technology, Inc. (www.cellsignal.com) (CSTI). The foregoing website is maintained by CSTI, and Blueprint
Medicines is not responsible for its content.
Therapeutic areas of focus
Our approach is rooted in a deep understanding of the genetic blueprint of cancer and other rare diseases
driven by the abnormal activation of kinases. Our ability to identify novel drivers of disease, coupled with
our proprietary library of novel and diverse chemical compounds, uniquely enables us to craft targeted
kinase therapies against new and difficult-to-drug targets.
Highly selective kinase medicines
Targeted patient populations
Rapid clinical proof-of-concept
GENOMICALLY
DEFINED
CANCERS
RARE
GENETIC
DISEASES
CANCER
IMMUNOTHERAPY
Robust pipeline of diverse assets
DRUG CANDIDATE (TARGET)
DISCOVERY
PRECLINICAL
PHASE 1-2
PIVOTAL
COMMERCIAL RIGHTS
avapritinib
(KIT & PDGFRα)
Phase 1 NAVIGATOR – Advanced PDGFRα-driven GIST
Phase 1 NAVIGATOR – Advanced 3L+ (KIT-driven) GIST
Phase 1 NAVIGATOR – 2L (KIT-driven) GIST
Phase 3 VOYAGER – Advanced 3L GIST (planned 1H 2018)
Phase 1 EXPLORER – Advanced systemic mastocytosis (SM)
Phase 2 – Advanced systemic mastocytosis (planned 1H 2018)
Phase 2 – Advanced SM (planned 1H 2018)
Phase 2 – Indolent and smoldering SM (planned 2H 2018)
BLU-554 (FGFR4)
Phase 1 – Advanced hepatocellular carcinoma
BLU-667 (RET)
Phase 1 ARROW – Advanced NSCLC, thyroid, other cancers*
BLU-782 (ALK2)
Fibrodysplasia ossificans progressiva
2 UNDISCLOSED
KINASE TARGETS
IMMUNOKINASE
TARGETS
Up to 5 cancer immunotherapy programs; development stage undisclosed†
*Phase 1 trial includes a basket cohort that consists of other advanced solid tumors with RET alterations.
†Blueprint Medicines has U.S. commercial rights for up to two programs. Roche has worldwide commercialization rights for up to three programs and ex-U.S.
commercialization rights for up to two programs.
2L = second-line. 3L = third-line. GIST = gastrointestinal stromal tumors. NSCLC = non-small cell lung cancer. SM= systemic mastocytosis.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
(cid:59)
(cid:134)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37359
BLUEPRINT MEDICINES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
45 Sidney Street
Cambridge, MA
(Address of principal executive offices)
26-3632015
(IRS Employer
Identification No.)
02139
(Zip Code)
Registrant’s telephone number, including area code: (617) 374-7580
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Common Stock, par value $0.001 per share
Name of Exchange on Which Registered
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 (cid:59) No (cid:134)
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 (cid:134) No (cid:59)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes (cid:59) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such files). Yes (cid:59) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer (cid:59)
Non-accelerated filer (cid:134)
(Do not check if a smaller reporting company)
Accelerated filer (cid:134)
Smaller reporting company (cid:134)
Emerging growth company (cid:134)
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. (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:59)
As of June 30, 2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the last reported
sales price for the registrant’s common stock, par value $0.001 per share, on the Nasdaq Global Select Market on such date, was approximately $1,953,767,657.
Number of shares of the registrant’s common stock, par value $0.001 per share, outstanding on February 15, 2018: 43,704,031
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2018 Annual Meeting of Stockholders, which the registrant intends to file with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2017, are incorporated by reference
into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
Page
Item 1.
Item1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
42
81
81
81
82
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
84
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
85
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Change in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . 102
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . 105
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Item 15.
Item 16.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
PART IV
Unless otherwise stated, all references to “us,” “our,” “Blueprint,” “Blueprint Medicines,” “we,” the
“Company” and similar designations in this Annual Report on Form 10-K refer to Blueprint Medicines Corporation and
its consolidated subsidiary, Blueprint Medicines Security Corporation.
FORWARD-LOOKING STATEMENTS
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 are
forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,”
“believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “target,” “will,” “would” or the negative of these words or other comparable terminology,
although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, statements
about:
•
•
•
•
•
•
•
•
•
•
•
•
•
the initiation, timing, progress and results of our pre-clinical studies and clinical trials, including our
ongoing Phase 1 clinical trials and any planned clinical trials for avapritinib (formerly known as
BLU- 285), BLU-554, BLU-667 and BLU-782, and our research and development programs;
our ability to advance drug candidates into, and successfully complete, clinical trials;
the timing or likelihood of regulatory filings and approvals;
the commercialization of our drug candidates, if approved;
the pricing and reimbursement of our drug candidates, if approved;
the implementation of our business model, strategic plans for our business, drug candidates and
technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering
our drug candidates and technology;
estimates of our expenses, future revenues, capital requirements and our needs for additional
financing;
the potential benefits of our existing cancer immunotherapy collaboration with F. Hoffmann-La Roche
Ltd and Hoffmann-La Roche Inc., as well as our ability to enter into other strategic arrangements;
the development of companion diagnostic tests for our drug candidates;
our ability to maintain and establish collaborations;
our financial performance; and
developments relating to our competitors and our industry.
Any forward-looking statements in this Annual Report on Form 10-K reflect our current views with respect to
future events or to our future financial performance and involve known and unknown risks, uncertainties and other
important factors that may cause our actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by these forward-looking statements. We have
included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the
“Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements
that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint
ventures or investments we may make or enter into.
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, performance or
1
achievements may be materially different from what we expect. Except as required by law, we assume no obligation to
update or revise these forward-looking statements for any reason, even if new information becomes available in the
future.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our
industry, our business and the markets for certain diseases, including data regarding the estimated size of those markets,
and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts,
projections, market research or similar methodologies is inherently subject to uncertainties and actual events or
circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise
expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and
similar data prepared by market research firms and other third parties, industry, medical and general publications,
government data and similar sources.
2
Item 1. Business.
Overview
PART I
We are a biopharmaceutical company focused on developing potentially transformational medicines to improve
the lives of patients with genomically defined cancers and rare diseases. Our approach is to leverage our novel target
discovery engine to systematically and reproducibly identify kinases that are drivers of diseases in genomically defined
patient populations and to craft highly selective and potent drug candidates that may provide significant and durable
clinical responses for patients without adequate treatment options. This integrated biology and chemistry approach
enables us to identify, characterize and design drug candidates to inhibit novel kinase targets that have been difficult to
selectively inhibit. By focusing on diseases in genomically defined patient populations, we believe that we will have a
more efficient development path with a greater likelihood of success.
Our most advanced drug candidates are avapritinib (formerly known as BLU-285), BLU-554 and BLU-667.
Our lead drug candidate, avapritinib, is an orally available, potent and highly selective inhibitor that targets KIT and
PDGFR(cid:302) mutations. These mutations abnormally activate receptor tyrosine kinases that are drivers of cancer and
proliferative disorders, including gastrointestinal stromal tumors, or GIST, and systemic mastocytosis, or SM. We are
currently evaluating avapritinib in an ongoing Phase 1 clinical trial for defined subsets of patients with GIST, which we
refer to as the Navigator trial, and an ongoing Phase 1 clinical trial for advanced SM, which we refer to as the Explorer
trial. GIST is a rare disease that is a sarcoma, or tumor of bone or connective tissue, of the gastrointestinal tract, or GI
tract, and SM is a rare disorder that causes an overproduction of mast cells and the accumulation of mast cells in the
bone marrow and other organs, which can lead to a wide range of debilitating symptoms and organ dysfunction and
failure.
BLU-554 is an orally available, potent and highly selective inhibitor that targets FGFR4, a kinase that is
aberrantly activated in a defined subset of patients with hepatocellular carcinoma, or HCC, the most common type of
liver cancer. We are currently evaluating BLU-554 in an ongoing Phase 1 clinical trial in patients with advanced HCC.
BLU-667 targets RET, a receptor tyrosine kinase that is abnormally activated by mutations or translocations,
and RET resistance mutations that we predict will arise from treatment with first generation therapies. RET drives
disease in subsets of patients with non-small cell lung cancer, or NSCLC, and cancers of the thyroid, including
medullary thyroid carcinoma, or MTC, and papillary thyroid cancer, and our research suggests that RET may drive
disease in subsets of patients with colon cancer, breast cancer and other cancers. We are currently evaluating BLU-667
in an ongoing Phase 1 clinical trial in patients with RET-altered NSCLC, MTC and other advanced solid tumors.
In addition, in the fourth quarter of 2017, we nominated a development candidate, BLU-782, for our discovery
program targeting the kinase ALK2 for the treatment of fibrodysplasia ossificans progressiva, or FOP, a rare genetic
disease caused by mutations in the ALK2 gene, ACVR1. We anticipate initiating IND-enabling studies for BLU-782 in
the first half of 2018.
We plan to continue to leverage our discovery platform to systematically and reproducibly identify kinases that
are drivers of diseases in genomically defined patient populations and craft drug candidates that potently and selectively
target these kinases. We currently have two wholly-owned discovery programs for undisclosed kinase targets, and we
anticipate nominating at least two additional discovery programs in 2018.
In addition to our wholly-owned clinical and pre-clinical programs, in March 2016, we entered into an
agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. to discover, develop and commercialize up to
five small molecule therapeutics targeting kinases believed to be important in cancer immunotherapy, as single products
or possibly in combination with other therapeutics. We will continue to evaluate additional collaborations that could
maximize the value for our programs and allow us to leverage the expertise of strategic collaborators. We are also
focused on engaging in collaborations to capitalize on our discovery platform outside of our primary strategic focus area
of cancer.
3
We currently have worldwide development and commercialization rights to avapritinib, BLU-554, BLU-667
and BLU-782 and all of our discovery programs other than the pre-clinical programs under the Roche collaboration. In
September 2015, the FDA granted orphan drug designation to BLU-554 for the treatment of HCC, and in January 2016,
the FDA granted orphan drug designation to avapritinib for the treatment of GIST and mastocytosis. In October 2016,
the FDA granted fast track designation to avapritinib for the treatment of patients with unresectable or metastatic GIST
that progressed following treatment with imatinib and a second tyrosine kinase, or TKI, inhibitor and for the treatment of
patients with unresectable or metastatic GIST with the PDGFR(cid:302) D842V mutation regardless of prior therapy. In
addition, in June 2017, the FDA granted breakthrough therapy designation to avapritinib for the treatment of patients
with unresectable or metastatic GIST harboring the PDGFR(cid:302) D842V mutation, and in July 2017, the European
Commission granted orphan drug designation to avapritinib for the treatment of GIST.
Approved kinase drugs, such as imatinib, have demonstrated significant benefit to patients, and small molecule
kinase drugs achieved approximately $25 billion in 2017 sales. Despite this success, there is room for further
improvement in kinase drug discovery and development. Many of the approved drugs are multi-kinase inhibitors that are
not selective for disease drivers. This results in off-target toxicities that limit dose levels and target inhibition, thereby
reducing efficacy. Further, patients who initially respond to a targeted kinase treatment often relapse due to the
development of resistance mutations. For many of the known kinases, there is a strong link between genomic alterations
in a kinase and disease, including specific forms of cancer and rare genetic diseases. However, the function of the
majority of the kinome is still unknown. As of December 31, 2017, there were approximately 35 small molecule drugs
approved by the FDA that target less than five percent of the 518 kinases. Taken together, this represents a substantial
opportunity for developing novel and transformative drugs for cancer, rare genetic diseases and other disease areas,
including cancer immunotherapy.
To capitalize on the kinase opportunity, we built a discovery platform that integrates a novel target discovery
engine and a proprietary compound library. Our novel target discovery engine combines our expertise in genomics,
bioinformatics, and cell and structural biology to provide new insights into the biology of kinases as drivers of disease.
To develop kinase drugs, we start by interrogating our proprietary compound library. Our library is a unique collection
of novel small molecules rationally designed and developed entirely in-house by Blueprint Medicines’ scientists as
kinase inhibitors and enriched for drug-like properties. We do not owe any royalties or other fees to any parties
associated with our novel target discovery engine and our proprietary compound library, other than any royalties or other
fees that may become payable to Roche under our cancer immunotherapy collaboration. Using this discovery platform,
we have produced a drug pipeline of several promising drug candidates that target genomically defined patient subsets.
Our Strategy
Our goal is to become a fully-integrated, biopharmaceutical company capable of delivering multiple
transformative drugs to patients. The key tenets of our strategy include the following:
• Rapidly advance the clinical development of avapritinib as a potential treatment for broad
populations of GIST and SM, and if successful, seek global regulatory approval.
• Prepare for a potential commercial launch of avapritinib and build commercial capability to bring
avapritinib and our other drug candidates, if and when approved, to physicians and patients for the
approved indications.
• Rapidly advance BLU-554, BLU-667 and BLU-782 through clinical development and define the
potential regulatory path for these drug candidates.
• Continue to expand our broad, differentiated pipeline of kinase drug candidates for patients with
genomically defined cancers and rare diseases.
• Evaluate potential strategic collaborations to maximize the value of our programs and platform.
• Maintain a commitment to Blueprint Medicines’ patient-focused and science-driven culture as we
grow our business.
4
Our Focus — Highly Selective Kinase Drugs for Genomically Defined Cancers and Rare Diseases
Kinases are enzymes that function in many signaling pathways to regulate critical cellular functions. Kinase-
dependent signaling networks are present in multiple different cell types, including muscle cells and cells of the immune
system, and deregulation of these networks can lead to disease pathology. Abnormal activation of kinases has been
shown to drive several key activities of cancer cells, including growth, survival, metabolism, cell motility and
angiogenesis. Kinases may become abnormally activated through a number of mechanisms, including when: (1) a gene
mutates creating a change in the resulting protein sequence; (2) chromosomes become rearranged creating a
translocation or a fusion gene; or (3) excessive amounts of protein are created due to gene duplication or dysregulation
leading to overexpression. There is a strong link between genomic alterations in kinases and disease, including specific
forms of cancer and rare genetic diseases. Several kinases have been validated as oncogenes, which are genes that when
altered can initiate and maintain cancer growth. Examples of oncogenes are ABL, EGFR, B-RAF, ALK, BTK and JAK,
among many others. Ongoing genomic analyses of tumor data sets continue to identify new roles for kinases as drivers
of disease.
Despite these successes, many opportunities remain in kinase drug discovery and development.
•
Identifying novel kinase drivers of disease. Very few kinases are the focus of approved drugs. Further,
the function of the majority of the kinome still remains unexplored. Thus, there is substantial
opportunity for developing novel and transformative therapies that target well-characterized but
currently difficult-to-drug kinases as well as KUBs.
• Crafting very selective kinase drugs. Due to the high degree of homology between kinases, specific
targeting of a given kinase can be challenging. Many of the approved kinase drugs inhibit multiple
kinases and are referred to as multi-kinase inhibitors. Due to inhibition of off-target kinases, these
multi-kinase inhibitors often give rise to severe unwanted effects, which can negatively impact the
ability to dose patients at sufficient levels to achieve optimal efficacy. We believe increasing
selectivity will minimize off-target toxicities and will improve efficacy by enabling higher dose levels
and greater target inhibition. Further, combination therapies require that the drugs have
non-overlapping toxicities, which could be minimized with more selective agents.
• Generating novel chemical matter required to target difficult-to-drug kinases. Novel chemical matter
is needed to address targets that are known but have proven difficult-to-drug. Pharmaceutical
companies generally rely on known chemical families as the basis of drug discovery programs.
Consequently, the vast majority of pharmaceutical companies have similar compound libraries. New
approaches are needed to develop novel chemistry and differentiated libraries that can inhibit
difficult-to-drug kinases in alternate ways.
• Overcoming resistance mediated by the alteration of kinase targets. Most approved kinase inhibitors
provide only temporary disease control. Patients may relapse due to the emergence of on-target
resistance mutations. Novel approaches are needed to predict and inhibit resistant mutants thus
providing more durable clinical responses.
Our Approach and Platform
Our approach is to systematically and reproducibly identify kinases that are drivers of diseases in genomically
defined patient populations and to craft drug candidates that provide significant and durable clinical responses to
patients. This approach enables us to drug known kinase targets that have been difficult to inhibit selectively and also
identify, characterize and design drug candidates to inhibit novel kinase targets. By focusing on diseases in genomically
defined patient populations, we believe that we can quickly identify the patients most likely to respond, resulting in a
more efficient development path with a greater likelihood of success.
Our approach is enabled by our drug discovery platform consisting of two pillars:
•
a proprietary, highly-annotated library of novel compounds; and
5
•
a novel target discovery engine, which is a comprehensive process that interrogates kinase biology
from many angles using genomics, structural biology and cell biology.
Our proprietary compound library is a unique collection of small molecules designed and developed entirely
in-house by Blueprint Medicines’ scientists as kinase inhibitors and enriched for drug-like properties. We do not owe
royalties or other fees to any parties associated with our novel target discovery engine and our proprietary compound
library. This provides high-quality compounds to start kinase drug discovery programs and to use in identifying new
kinase targets. The compounds were designed as kinase inhibitors without specific targets in mind, a design strategy that
yielded a diversity of novel chemical structures that provide access to unique chemical matter. Each compound has been
extensively characterized for binding to over 450 kinases and disease-relevant kinase mutants, and the majority of
known kinases are targeted by at least one compound family. Thus, this “annotated” compound library provides
high-quality medicinal chemistry starting points that enable quick-starts to drug discovery programs, avoiding the
expense and time spent running high throughput screens. Notably, our proprietary compound library has yielded high
quality chemical starting points for previously difficult-to-drug kinases. We have continued to expand our proprietary
compound library to cover a significant portion of the kinome and anticipate that as part of our discovery efforts we will
continue to increase the number of compound families that inhibit each kinase target.
We have established a novel target discovery engine, which was developed entirely in-house, to provide new
insights into the biology of kinases as drivers of disease and to identify new kinase drug targets. There are two aspects to
the novel target discovery engine:
• Genomics Approach to Identify Novel Kinase Targets. Our high-capacity computing infrastructure
allows not only storage of very large genomic databases but also rapid analyses of these data using
proprietary algorithms developed by our bioinformaticians. For example, using our proprietary kinase
fusion detection algorithm to analyze human tumor sequences, we have identified both novel kinase
fusions and new disease indications for several known kinase fusions. These results were published in
Nature Communications in 2014.
• Cell-based Screens to Identify Novel Kinase Targets. In this approach, a subset of the compounds in
our proprietary compound library that exhibit remarkable potency and/or selectivity for one or a few
kinases — our “tool compounds” — are used as probes in disease-relevant cell-based screens. Many of
these tool compounds inhibit KUBs and thus allow us to evaluate potential roles for these relatively
unexplored kinases in human disease.
Another aspect of our novel discovery engine is predicting resistance mutations. Through our structural and cell
biology expertise, we predict mutations in kinases that render the enzyme insensitive to inhibition by an approved drug
or compound in development. While treatment of patients with genomically defined cancers with a targeted therapy
typically results in a significant anti-tumor response, frequently the response is not durable. In tumors driven by an
activated kinase, kinase reactivation via mutation is a common mechanism of resistance. Using our structural biology
and computational chemistry expertise, we predict what changes in the kinase might result in a resistant enzyme and then
confirm this prediction in a relevant cell culture model.
6
Our Development Programs
We have leveraged our discovery platform to develop a robust drug pipeline of orally available, potent and
selective small molecule kinase inhibitors that target genomic drivers in several cancers and a rare genetic disease. We
currently own worldwide development and commercial rights to all of our pre-clinical and clinical programs other than
any drug candidates being developed in our cancer immunotherapy collaboration with Roche. The following table
summarizes our most advanced drug candidates as of February 15, 2018, each of which is described in further detail
below.
Drug Candidate
(Genomic Target)
Initial Diseases
Stage of Development
Commercial Rights
avapritinib
Advanced PDGFR(cid:302)-driven GIST
(KIT and PDGFR(cid:302) mutations)
Phase 1 enrolling
(Navigator)
Blueprint Medicines
Advanced KIT-driven GIST (second
line and (cid:149) third line)
Phase 1 enrolling
(Navigator)
Advanced GIST (third line)
Phase 3 planned (Voyager)
Advanced SM
Advanced SM
Phase 1 enrolling
(Explorer)
Phase 2 planned
Indolent and smoldering SM
Phase 2 planned
BLU-554
Advanced HCC
Phase 1 enrolling
Blueprint Medicines
(aberrantly activated FGFR4)
BLU-667
(RET fusions, mutations and
predicted resistant mutants)
Advanced NSCLC, MTC and other
advanced solid tumors
Phase 1 enrolling
Blueprint Medicines
BLU-782
FOP
(ALK2 mutations)
Development candidate
selected
Blueprint Medicines
Cancer immunotherapy
Oncology
Undisclosed
(immunokinase targets)
Blueprint
Medicines (1)
Roche (2)
(1) Blueprint Medicines has U.S. commercialization rights for up to two programs.
(2) Roche has worldwide commercialization rights for up to three programs and ex-U.S. commercialization rights for up to two programs.
All of our current clinical programs target patient populations with genomically defined diseases. Generally, as
we advance our drug candidates through Phase 1 clinical development, we enrich our clinical trials by selecting patients
most likely to respond to our drug candidates to confirm mechanistic and clinical proof of concept. We are also
collaborating with third parties to develop and commercialize companion diagnostic tests for avapritinib in order to
identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4
pathway activation and BLU-667 in order to identify NSCLC patients with RET fusions. We may collaborate with other
third parties in the future to develop and commercialize additional companion diagnostic tests or to develop assays to
measure target engagement, pathway modulation and early response.
7
The table below lists the initial diseases and genomic drivers targeted by avapritinib, BLU-554, BLU-667 and
BLU-782, and for each of these diseases, the corresponding estimated number of patients in the United States, France,
Germany, Italy, Spain, the United Kingdom and Japan, or the Major Markets. In addition, the table lists the estimated
frequency of the genomic alterations that we are initially targeting for each of these diseases.
Drug
Candidate
avapritinib
Estimated Number of Patients (1)
Initial Diseases
United States
Total Major Markets
Genomic Drivers
Estimated
Frequency of Alteration
(% of Patients)
3,300 first line
8,700 first line
D842V mutant PDGFR(cid:302)
~5-6% of primary GIST
GIST
3,000 second line
7,700 second line
3,600 (cid:149) third line
7,700 (cid:149) third line
1,100 advanced SM
2,600 advanced SM
KIT mutations
~80%
SM
700 smoldering SM
1,800 smoldering SM
KIT D816V mutation
~90-95%
BLU-554
HCC (2)
6,600 indolent SM
16,300 indolent SM
18,700 first line
64,700 first line
8,200 second line
29,000 second line
147,000 first line
373,000 first line
Aberrant FGFR4 signaling
~30%
BLU-667
NSCLC
87,500 second line
217,100 second line
RET fusions
39,400 third line
89,700 third line
MTC
640 total
1,300 total
RET mutations
BLU-782
FOP
400 total
1,100 total
ALK2 mutations
~1-2%
~60%
~100%
(1) Based on estimated prevalence for SM, MTC patients and FOP patients and estimated incidence for GIST, HCC and NSCLC patients.
Estimates for GIST, HCC and NSCLC include metastatic and unresectable patient populations.
(2) The incidence of HCC outside of the Major Markets, including in China, South Korea, Taiwan and Singapore, represents an additional
opportunity for BLU-554.
KIT and PDGFR(cid:302) Inhibitor Program (avapritinib)
Overview
Avapritinib is an orally available, potent and highly selective inhibitor that targets the homologous kinases KIT
and PDGFR(cid:302), receptor tyrosine kinases that are drivers of cancer and proliferative disorders when abnormally activated.
We specifically designed avapritinib to preferentially interact with the active conformation of KIT and PDGFR(cid:302) to
potently inhibit activation loop mutants not well-targeted by other agents, as well as a broad spectrum of other clinically
relevant mutations. Avapritinib is able to potently and selectively inhibit both KIT and PDGFR(cid:302) mutations with minimal
inhibition of other kinases due to the high degree of structural similarity of the kinase domains of KIT and PDGFR(cid:302).
Kinome tree locations of KIT and PDGFR(cid:302) illustrating close structural similarity between these kinases. Each branch of the dendogram
represents an individual human kinase. Kinome illustration reproduced courtesy of Cell Signaling Technology, Inc., or CSTI
(www.cellsignal.com). The foregoing website is maintained by CSTI, and Blueprint Medicines is not responsible for its content.
8
We are initially developing avapritinib for PDGFR(cid:302)-driven GIST and KIT-driven GIST, which we collectively
refer to as advanced GIST, and for advanced SM. In addition, based on the preliminary safety and clinical activity data
from our Phase 1 clinical trial for avapritinib for advanced SM to date, including evidence of clinical activity starting at
the lowest dose level, we anticipate initiating a Phase 2 dose escalation and proof-of-concept clinical trial to evaluate
avapritinib in patients with indolent SM, or ISM, and smoldering SM, or SSM, in the second half of 2018. We also plan
to evaluate further development of avapritinib in additional diseases driven by KIT and PDGFR(cid:302).
Gastrointestinal Stromal Tumors (GIST)
GIST Disease Background
GIST is a rare disease that is a sarcoma of the GI tract. Tumors arise within cells in the wall of the GI tract and
occur most often in the stomach or small intestine. Most patients are diagnosed between the ages of 50-80 with diagnosis
triggered by GI bleeding, incidental findings during surgery or imaging, or in rare cases acute presentation due to tumor
rupture or GI obstruction. The standard workup at primary presentation includes pathologic confirmation and imaging to
assess extent of disease.
The GIST treatment paradigm has advanced dramatically over the past 15 years. Patients diagnosed with
localized disease undergo potentially curative tumor resection, while imatinib is given to high risk resected patients to
prolong the time to recurrence. The advent of imatinib has improved the prognosis of patients with unresectable or
metastatic disease to a five-year median overall survival. Unresectable or metastatic patients typically receive imatinib,
followed by sunitinib and regorafenib as the disease progresses.
For patients with KIT-driven GIST, current medical therapies slow the course of disease but progression is
inevitable in most cases. Up to 50% of patients treated with frontline imatinib relapse within approximately 18 months.
Of the secondary resistance mutations that lead to relapse, many of the mutations are not addressed by current therapies
and confer mutations confer resistance to current treatments. A therapy that effectively suppresses a broad spectrum of
KIT mutations and that is potentially amenable to combinations with existing agents is needed.
Patients with PDGFR(cid:302) D842V-driven GIST have great unmet medical need, as no approved medical therapies
are effective. Progression can occur within as little as three months, and the median overall survival is 15 months for
patients with advanced disease.
In the Major Markets, we estimate there are approximately 24,100 patients with unresectable or metastatic
GIST, including approximately 7,700 patients with second line GIST and approximately 7,700 patients with third line or
later GIST. The PDGFR(cid:302) D842V mutation is found in 5-6% of frontline unresectable or metastatic GIST patients, and
we estimate there are approximately 500 patients with PDGFR(cid:302) D842V-driven GIST in the Major Markets.
KIT and PDGFR(cid:302) Driver Mutations in GIST
GIST is a tumor type that depends on continued signaling of a single, aberrantly active kinase. Most GISTs
result from primary mutations in KIT or PDGFR(cid:302). Approximately 80% of patients have KIT-driven GIST. Imatinib
effectively inhibits most KIT primary mutations; however over time, secondary mutations occur elsewhere in the KIT
gene that lead to kinase activation despite the presence of imatinib, thereby leading to disease progression. The most
common mutation in the PDGFR(cid:302) gene is D842V, found in approximately 5-6% of frontline unresectable or metastatic
GIST patients. There is currently no therapeutic option for patients with D842V mutant PDGFR(cid:302)-driven GIST.
PDGFR(cid:302) has a very similar active site structure to KIT, and the PDGFR(cid:302) D842V mutation is homologous to KIT
D816V. As in the case of KIT Exon 17 mutant receptors, PDGFR(cid:302) D842V mutations confer ligand-independent
constitutive signaling of the mutant PDGFR(cid:302) kinase.
9
Pre-clinical Development of avapritinib in GIST
We have conducted comprehensive pre-clinical experiments to characterize the potency and selectivity of
avapritinib. Avapritinib potently inhibits PDGFR(cid:302) D842V in vitro (IC50 = 0.24 nM). In contrast, imatinib inhibits
PDGFR(cid:302) D842V at least 3,000-fold less potently (IC50 = 759 nM). In a cellular model driven by an activated PDGFR(cid:302)
D842V mutant protein, avapritinib potently inhibits signaling of the oncogenic PDGFR(cid:302) mutant protein as measured by
inhibition of PDGFR(cid:302) autophosphorylation (IC50 = 30 nM). By comparison, imatinib shows at least 100-fold lower
potency in the cellular model (IC50 = 3,145 nM).
We have also demonstrated significant anti-tumor efficacy with avapritinib in an imatinib-resistant
patient-derived xenograft models with a KIT Exon 17 resistance mutation, similar to what is found in relapsed/refractory
KIT-driven GIST, as well as patient-derived xenograft models with KIT Exon 11 and KIT Exon 13 mutations. In these
xenograft models, avapritinib administered orally for 25 days resulted in tumor regression at the two highest tested
doses, which were well-tolerated.
Avapritinib elicits dose-dependent tumor regression in a patient-derived GIST xenograft model with a KIT Exon 11 mutation, KIT Exon 13
mutations and a KIT Exon 17 resistance mutation. In the figure above, QD means once a day and BID means twice a day.
We recently presented pre-clinical data showing avapritinib is active across a broad spectrum of KIT and
PDGFR(cid:302) mutations, as shown in the figure below.
KIT Exon 11 deletion
KIT Exon 11 V560G
KIT Exon 11/13
KIT Exon 11/14
KIT Exon 17
KIT Exon 17 D816V
PDGFR(cid:302) Exon 18 D842V
JM domain mutations
ATP binding site mutations
Activation loop mutations
IC50 (nM)
avapritinib
0.6
1
11
28
< 2
0.27
0.24
imatinib
12
87
9,160
19,650
60 – 12,750
8,150
759
In addition, we have developed an understanding of the biology that will inform the development of
combinations to address these resistance mutations. We performed a comprehensive analysis of these secondary KIT
Exon 17 mutations, analyzing the literature and unpublished data from opinion leaders to understand which mutations
occur and to quantify their frequency in the clinical setting. We also conducted a series of in vitro biochemistry
experiments using compounds from our proprietary compound library and currently available therapies (imatinib,
sunitinib and regorafenib) to interrogate their activity against the range of KIT Exon 17 mutations. The result is a deep
understanding of the spectrum of activity of avapritinib, additional compounds from our proprietary compound library
and available therapies across the range of possible mutations.
10
Navigator Trial (avapritinib) – Phase 1 Clinical Trial for Patients with Advanced GIST
Avapritinib is currently being evaluated in the dose expansion portion of a Phase 1 clinical trial in patients with
advanced GIST, which we refer to as the Navigator trial, and enrollment is ongoing. In November 2017, we reported
updated data from the dose escalation and expansion portions of the Navigator trial at the Connective Tissue Oncology
Society Annual Meeting.
As of the data cutoff date of October 11, 2017, 116 patients had been treated with avapritinib in the dose
escalation and expansion portions of the Navigator trial at eight dose levels (ranging from 30 mg QD to 600 mg QD),
including 76 patients with KIT-driven GIST, 39 patients with PDGFR(cid:302)-driven GIST, and one patient with KIT/PDGFR(cid:302)
wild-type GIST. The median number of prior TKI regimens was four for patients with KIT-driven GIST (ranging from
two to 11), and one for patients with PDGFR(cid:302)-driven GIST (ranging from zero to six). Among patients with KIT-driven
GIST, 64 patients (83%) previously received regorafenib. We have selected 300 mg QD as the RP2D for the expansion
portion of the Navigator trial, with an option for investigators to escalate patients to the MTD of 400 mg QD following
two treatment cycles.
Safety Data. As of the data cutoff date, avapritinib was generally well-tolerated. Most AEs reported by
investigators were Grade 1 or 2. Across all grades, the most common treatment-emergent AEs reported by investigators
((cid:149)20%) included nausea (56%), fatigue (53%), periorbital edema (43%), vomiting (41%), edema peripheral (34%),
anemia (31%), diarrhea (31%), increased lacrimation (30%), cognitive effects (30%), decreased appetite (28%),
dizziness (23%), constipation (22%) and hair color changes (22%). Cognitive effects are an aggregated category of
individual cognitive events, each of which was observed in fewer than 20% of patients. Investigators reported
treatment-related Grade (cid:149)3 AEs in 39 patients (34%), including anemia (9%), fatigue (7%), hypophosphatemia (4%),
nausea (4%) and cognitive effects (3%). Six patients (5%) discontinued treatment with avapritinib due to AEs. An
additional 43 patients discontinued treatment, with 40 patients due to progressive disease and three patients who
withdrew consent. Among all 116 enrolled patients, 67 remained on treatment as of the data cutoff date.
Clinical Activity Data. As of the data cutoff date, 30 patients with KIT-driven GIST treated at 300 to 400 mg
QD were evaluable for response assessments. In addition, 31 patients with PDGFR(cid:302) D842-driven GIST at all doses were
evaluable for response assessments, including 29 patients with a D842V mutation and two patients with other D842
mutations. Two patients with a PDGFR(cid:302) exon 14 mutation were excluded from analyses of clinical activity. Patients
were evaluable if they had at least one centrally reviewed radiographic scan, and all reported data are based on blinded
central radiology review as per modified Response Evaluation Criteria in Solid Tumors version 1.1, or mRECIST 1.1
criteria, for GIST. Radiographic scans were also assessed by Choi criteria, a supportive method of response assessment
in soft tissue sarcomas that has been shown to be predictive of improved prognosis in patients with advanced GIST.
Patients with heavily pretreated KIT-driven GIST treated at doses of 300 to 400 mg QD
• Centrally assessed radiographic tumor reductions were observed in 20 of 30 evaluable patients (67%)
across all common KIT genotypes, including mutations in exons 9, 11, 13, 14 and 17, confirmed by
archival tumor biopsy and circulating tumor DNA.
• By mRECIST 1.1 criteria, five patients had a PR (three confirmed, two pending confirmation), and
18 patients had SD, representing an ORR of 17% and a disease control rate, or DCR, of 77%.
• By Choi criteria, 16 patients had a PR and seven patients had SD, representing an ORR of 53% and a
DCR of 77%.
• Median PFS was 11.5 months.
•
In contrast, historical data showed a zero percent ORR and median PFS of 1.8 months in patients with
TKI-resistant advanced GIST re-treated with imatinib in a third-line or later setting.
Patients with PDGFR(cid:302)-driven GIST
• Centrally assessed radiographic tumor reductions were observed in all 31 evaluable patients.
11
• By mRECIST 1.1 criteria, one patient had a CR (pending confirmation), 21 patients had a PR
(18 confirmed, three pending confirmation), and nine patients had SD, representing an ORR of 71%
and a DCR of 100%.
• By Choi criteria, one patient had a CR, and 30 patients had a PR, representing an ORR of 100%.
• Median PFS was not reached, and 12-month PFS was estimated to be 78%.
•
In contrast, historical data showed a zero percent ORR and median PFS of 2.8 months in patients with
PDGFR(cid:302) D842V-driven GIST treated with imatinib.
Navigator Trial Design. The Navigator trial is designed to evaluate the activity, safety and tolerability of
avapritinib in adults with advanced GIST. The trial consists of two parts: a dose escalation portion and a dose expansion
portion. We have completed the dose escalation portion, and patient enrollment in the dose expansion portion of the
Navigator trial is currently ongoing at the RP2D of 300 mg QD. The expansion portion of this trial is designed to enroll
patients in the following cohorts: (1) patients with a PDFGR(cid:302) D842V mutation, regardless of line of therapy, (2) patients
who have received imatinib and at least one other TKI and (3) patients who have received imatinib and no other TKI.
Primary objectives for the dose expansion portion of the Navigator trial include determining ORR by RECIST and the
safety and tolerability of avapritinib across the three expansion cohorts. Secondary objectives include characterizing the
PK of avapritinib, assessing anti-tumor activity by Choi criteria and allelic burden using circulating tumor DNA and
comparing progression-free survival, or PFS, for avapritinib with PFS for each patient’s last prior anti-cancer therapy.
All response assessments use blinded, central radiology review. The Navigator trial is designed to enroll approximately
250 patients, including approximately 50 patients during dose escalation and approximately 200 patients across all three
expansion cohorts, at multiple sites in the United States, European Union and Asia.
Clinical Development Plans
In June 2017, the FDA granted breakthrough therapy designation to avapritinib for the treatment of patients
with unresectable or metastatic GIST harboring the PDGFR(cid:302) D842V mutation. In addition, in January 2016 the FDA
granted orphan drug designation to avapritinib for the treatment of GIST, and in October 2016, the FDA granted fast
track designation to avapritinib for the treatment of patients with unresectable or metastatic GIST that progressed
following treatment with imatinib and a second TKI inhibitor and for the treatment of patients with unresectable or
metastatic GIST with the PDGFR(cid:302) D842V mutation regardless of prior therapy. In July 2017, the European Commission
granted orphan drug designation to avapritinib for the treatment of GIST.
Based on feedback from the FDA at an end-of-Phase 1 meeting, additional data from the expansion portion of
the Navigator trial may be sufficient to support a new drug application for avapritinib for the treatment of PDGFR(cid:302)
D842V-driven GIST. We currently expect to complete enrollment of the PDGFR(cid:302) D842V expansion cohort for the
Navigator trial by the middle of 2018, and we have completed enrollment of the third line or later expansion cohort of
the Navigator trial. We plan to report updated data from the Navigator trial in the following patient populations in 2018:
PDGFR(cid:302)-driven GIST, second line KIT-driven GIST and third line or later KIT-driven GIST. In addition, we plan to
initiate a global, randomized Phase 3 clinical trial for avapritinib compared to regorafenib in third-line GIST in the first
half of 2018, which we refer to as the Voyager trial.
In addition, in August 2016, we entered into an agreement with a third party to develop and commercialize an
assay as a companion diagnostic test to identify GIST patients with the PDGFR(cid:302) D842V mutation for use with
avapritinib. We are also working with patient advocacy groups relevant to GIST in order to:
•
•
•
raise awareness of our ongoing Navigator trial;
identify and use existing patient registries to identify patients for rapid enrollment; and
incorporate the GIST patient perspective into our ongoing activities.
12
Systemic Mastocytosis (SM)
SM Disease Background
SM is a disorder of the mast cells, the key effector cells of allergic inflammation, which have several
physiologic roles including wound healing, regulation of vascular and epithelial permeability and immune cell
recruitment. The signature of SM is the overproduction of mast cells and the accumulation of mast cells in the bone
marrow and other organs. In advanced forms of SM, abnormal mast cells may also accumulate in the liver, spleen,
gastrointestinal tract and bones. Mast cell activation and histamine release can lead to severe allergic symptoms ranging
from a skin rash to hives, fever and anaphylaxis, while mast cell accumulation in advanced cases of SM can eventually
lead to organ dysfunction and failure.
SM comprises a spectrum of disease, with approximately 90-95% of patients having a KIT D816V mutation,
the underlying driver of disease for most SM patients. The diagnosis, which is usually made in adulthood, involves a
complex diagnostic algorithm that begins with confirmation of SM and subsequently categorizes patients into indolent or
advanced subtypes of disease, a classification that has prognostic significance as shown below. Patients with ISM have a
normal life expectancy. The primary burden of disease for ISM patients is the range of often unpredictable and
debilitating allergic symptoms due to mast cell activation. Advanced SM includes three subsets with increasingly severe
impact on life expectancy: aggressive SM, or ASM, advanced SM with an associated hematologic neoplasm, SM-AHN,
and mast cell leukemia, or MCL. These advanced forms of SM have a median overall survival of three to five years and
are characterized by prominent organopathy and dysfunction, as well as symptoms of mast cell activation. SSM is
increasingly considered as a variant of advanced SM. While SSM is not known to affect life expectancy, it has a greater
degree of bone marrow infiltration, myeloproliferation and/or presents with an enlarged liver and bears a greater risk of
progression to ASM, SM-AHN or MCL.
Overall survival of SM patients. Republished with permission of the American Society of Hematology, from “How I treat patients with
indolent and smoldering mastocytosis,” A. Pardanani, Blood, 121(16):3085 - 3094 (2013); permission conveyed through Copyright
Clearance Center, Inc. In the figure above, AHD refers to SM-AHN.
Population studies, including a population-based epidemiology study that we sponsored, based on the Danish
National Health Registry, estimate the incidence of all subtypes of SM from 0.5 to 1/100,000 new patients per year. This
represents approximately 3,200 new patients diagnosed per year in the United States. Of all SM patients, ISM accounts
for 50-80% of patients, and advanced SM accounts for the remaining 20-50% of patients.
The current treatment paradigm for SM varies by disease subtype. Currently, there are no approved targeted
therapies that address SM patients with the KIT D816V mutation. Midostaurin, which was approved in April 2017 by
the FDA for the treatment of advanced SM, is a multi-kinase inhibitor with KIT D816V inhibitory activity and imatinib
does not address patients with the KIT D816V mutation. For patients with advanced and smoldering forms of SM,
treatments include interferon-alpha or cytoreductive agents to reduce mast cell burden or treatments aimed at addressing
the associated blood disorder. Patients with advanced SM typically have a three to five-year overall survival prognosis.
In the Major Markets, we estimate there are approximately 2,600 patients with advanced SM.
13
For ISM, management is symptom-directed and includes avoidance of triggers of mast cell activation (such as
insect stings). Treatments for ISM include histamine blockers, cromolyn, epinephrine, and, in cases of refractory
patients, cytoreductive agents. Within ISM, key opinion leaders see the greatest degree of unmet need for the fraction of
patients who have a heavy symptom burden that current therapies fail to address. Based on the preliminary safety and
clinical activity data from our Phase 1 clinical trial of avapritinib in patients with advanced SM to date, including
evidence of clinical activity starting at the lowest dose level, we anticipate initiating a Phase 2 dose escalation and
proof-of-concept clinical trial to evaluate avapritinib in patients with ISM and SSM in the second half of 2018. In the
Major Markets, we estimate that there are approximately 16,300 patients with ISM and approximately 1,800 patients
with SSM.
KIT Driver Mutations in SM
In all subtypes of SM, the mast cells of approximately 90-95% of patients display an activating mutation at the
D816V position in KIT. KIT D816V status is routinely assessed as part of the workup in SM diagnosis.
KIT signaling is needed for normal blood cell production, including the differentiation and survival of mast
cells. In patients with SM, abnormal mast cells bearing the KIT D816V mutation undergo constitutive kinase activation,
leading to continuous survival and proliferative signals. Rare cases of SM have been found where alternative mutations
in KIT occur that are responsive to imatinib. In these cases, treatment with imatinib can reduce mast cell burden in the
bone marrow and other organs and improve symptoms, thereby clinically validating KIT as a therapeutic target for SM.
Pre-clinical Development of avapritinib in SM
We conducted comprehensive biochemical and cellular experiments to characterize the potency and selectivity
of avapritinib. Avapritinib potently inhibits KIT D816V in vitro (IC50, or the compound concentration at which 50% of
the activity is inhibited relative to control lacking compound, = 0.27 nM). In contrast, imatinib inhibits KIT D816V at
least 10,000-fold less potently (IC50 > 8,000 nM). In several cellular models driven by activated KIT mutant proteins,
avapritinib potently inhibits signaling of the oncogenic KIT mutant protein, as measured by inhibition of KIT
autophosphorylation and inhibition of cellular proliferation. In HMC 1.2 cells, a human mast cell leukemia model driven
by the KIT D816V mutation, avapritinib potently inhibits signaling of the mutant KIT protein as measured by inhibition
of KIT autophosphorylation (IC50 = 4 nM). In contrast, imatinib inhibits KIT autophosphorylation at least 2,000-fold less
potently. In P815 cells, a mouse mastocytoma model driven by an Exon 17 mutation, avapritinib potently inhibits
signaling of the mutant KIT protein as measured by inhibition of KIT autophosphorylation (IC50 = 22 nM) as well as
cellular proliferation (IC50 = 202 nM). By comparison, imatinib shows considerably lower cellular potency in the P815
model.
KIT D816V Inhibition
Biochemical
IC50 (nM)
avapritinib
Imatinib
KIT D816V
0.27
8,150
HMC1.2
P-KIT
4
9,229
Cellular
P815
P-KIT
22
1,235
P815
Prolif.
202
2,811
Potency of avapritinib against KIT D816 and other Exon 17 mutations compared to imatinib. The inhibitory potencies of avapritinib and
imatinib against the KIT D816V mutant protein were evaluated in an in vitro enzyme activity assay. The inhibitory potencies of avapritinib
and imatinib were also evaluated in two cell lines harboring KIT Exon 17 mutations, HMC 1.2 cells and P815 cells. Inhibition of KIT
cellular signaling was measured by inhibition of KIT autophosphorylation (P-KIT). Inhibition of cellular proliferation was also measured in
P815 cells.
The selectivity of avapritinib was further evaluated by profiling avapritinib at a concentration of 3 μM across a
panel of over 450 kinases and disease-relevant kinase mutants using KINOMEscan methodology. Avapritinib
demonstrated exquisite selectivity for KIT Exon 17 mutant proteins and PDGFR(cid:302) D842V in this assay, binding
significantly (greater than 90% inhibition relative to control) to only 12 other kinases. We also profiled midostaurin, a
multi-kinase inhibitor with KIT D816V inhibitory activity (an inhibitory activity not present in imatinib). Midostaurin
demonstrated significant binding (greater than 90% inhibition relative to control at 3 μ M) to 118 kinases, as indicated
by the number of dots on the kinome tree shown below. We believe multi-kinase inhibitors like midostaurin may not
achieve full inhibition of KIT D816V due to poor selectivity and the resulting dose limitations imposed by off-target
toxicities.
14
Kinome selectivity of avapritinib and midostaurin. Compounds were screened at 3 μM against a panel of over 450 kinases and
disease-relevant mutants. Each branch of the dendogram represents an individual human kinase. Kinases bound by the compound are
indicated by red circles on the kinome tree. The degree of binding corresponds to the size of the circle. Kinome illustration reproduced
courtesy of CSTI (www.cellsignal.com). The foregoing website is maintained by CSTI, and Blueprint Medicines is not responsible for its
content.
Explorer Trial (avapritinib) – Phase 1 Clinical Trial for Patients with Advanced SM
Avapritinib is currently being evaluated in the dose expansion portion of a Phase 1 clinical trial in patients with
advanced SM, which we refer to as the Explorer trial, and enrollment is ongoing. In December 2017, we reported
updated data from the dose escalation portion of the Explorer trial at the American Society of Hematology Annual
Meeting.
As of the data cutoff date of October 4, 2017, 32 patients had been treated with avapritinib in the dose
escalation portion of the Explorer trial at seven dose levels (ranging from 30 mg once daily, or QD, to 400 mg QD),
including 17 patients with aggressive SM, or ASM, nine patients with advanced SM with an associated hematologic
neoplasm, or SM-AHN, three patients with mast cell leukemia, or MCL, and two patients with SSM. The KIT D816V
mutation was confirmed in 28 patients. Overall, 22 patients (69%) previously received anti-neoplastic therapy, including
four patients (13%) who previously received midostaurin.
Based on pharmacokinetic, or PK, data, avapritinib demonstrated a mean half-life of greater than 20 hours,
supporting a QD dosing regimen.
We have selected 300 mg QD as the recommended part two dose, or RP2D, for the expansion portion of the
Explorer trial, which was initiated in the second quarter of 2017. A maximum tolerated dose of avapritinib in advanced
SM was not determined.
Safety Data. As of the data cutoff date, avapritinib was generally well-tolerated. Most adverse events, or AEs,
reported by investigators were Grade 1 or 2. As of the data cutoff date, the most common treatment-emergent AEs
reported by investigators ((cid:149)20%) across all grades included periorbital edema (59%), fatigue (41%), peripheral edema
(34%), nausea (28%), anemia (28%), thrombocytopenia (28%), abdominal pain, diarrhea, respiratory tract infection,
dizziness and headache (22% each). Investigators reported treatment-related Grade (cid:149)3 AEs in 16 patients (50%), with
only one treatment-related Grade (cid:149)3 AE occurring in more than 10% of patients (neutropenia, 13%).
No patients discontinued treatment due to a treatment-related AE. Two patients discontinued treatment with
avapritinib, including one patient with ASM who had progressive disease with transformation to acute myeloid leukemia
and one patient with SM-AHN and no identified KIT mutation (i.e., wild-type KIT). Overall, 30 of 32 patients enrolled
in the dose escalation portion of the Explorer trial remained on treatment as of the data cutoff date, with a median
duration of 9 months (range 4 to 19 months).
Clinical Activity Data. The International Working Group-Myeloproliferative Neoplasms Research and
Treatment and European Competence Network on Mastocytosis, or IWG-MRT-ECNM, criteria comprise a rigorous
assessment of clinical response in patients with advanced SM. These criteria include objective measures of bone marrow
mast cell burden, serum tryptase and improvement in organ damage as measured by a clinical improvement, or CI,
finding.
15
As of the data cutoff date, 18 patients had advanced SM and were evaluable for response by the
IWG-MRT-ECNM criteria.
Across all 18 evaluable patients with advanced SM, the data showed an objective response rate, or ORR, of
72% and a complete response (CR) + partial response (PR) rate of 56%. A detailed summary of response data is
provided below.
Avapritinib in Patients with Advanced SM; Assessment of Response per IWG-MRT-ECNM Criteria
Best Response, Number of Patients (%)*
CR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (29%)
PR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (43%) 4 (50%) 1 (33%)
CI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (14%) 1 (13%) 1 (33%)
Stable disease (SD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (14%) 3 (38%) 1 (33%)
Progressive disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ORR (CR + PR + CI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (86%) 5 (63%) 2 (67%) 13 (72%)
CR + PR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (71%) 4 (50%) 1 (33%) 10 (56%)
0
0
0
ASM
(n=7)
SM-AHN
(n=8)
0
MCL
(n=3)
0
Overall
(n=18)
2 (11%)
8 (44%)
3 (17%)
5 (28%)
0
*
Responses pending confirmation: ASM: 2 CR; SM-AHN: 3 PR
Results from individual components of the IWG-MRT-ECNM were reported as of the data cutoff date.
Clinically meaningful improvements were observed in all evaluable patients, across all subtypes of advanced SM and at
all avapritinib dose levels evaluated.
• All 32 enrolled patients had decreases in serum tryptase greater than 50%.
• All 25 patients who had bone marrow mast cell infiltrate of at least 5% at baseline (measured by bone
marrow biopsy) showed decreases in bone marrow mast cell burden. In this group, 21 patients had at
least a 50% decrease, and 15 patients achieved a CR for bone marrow mast cell burden.
• All 25 patients with centrally reviewed radiographic scans showed decreases in spleen volume. In this
group, 14 patients had at least a 35% reduction in spleen volume.
In addition, rash improved in 13 of 15 patients with urticaria pigmentosa at baseline, based on investigator
assessments. Urticaria pigmentosa is an allergy-mediated rash common in SM patients.
Explorer Trial Design. The Explorer trial is designed to evaluate the activity, safety and tolerability of
avapritinib in adults with advanced SM. The trial consists of two parts: a dose escalation portion and an expansion
portion. We have completed the dose escalation portion, and patient enrollment in the dose expansion portion of the
Explorer trial is currently ongoing at the RP2D of 300 mg QD. The expansion portion of this trial is designed to enroll
patients with specific subtypes of advanced SM in the following cohorts: (1) patients with aggressive SM, (2) patients
with an associated hematological neoplasm and (3) patients with mast cell leukemia. Primary objectives for the Explorer
trial include assessing safety and tolerability. Secondary objectives include assessing response per IWG-MRT-ECNM
criteria and additional clinical outcome measures of mast cell burden, organ function and disease symptoms. The
Explorer trial is designed to enroll approximately 60 patients, including approximately 25 patients during dose escalation
and approximately 35 patients across all three expansion cohorts, at multiple sites in the United States and the European
Union.
Clinical Development Plans
In January 2016, the FDA granted orphan drug designation to avapritinib for the treatment of mastocytosis.
Based on the data reported in December 2017, we plan to engage global regulatory authorities in the first half of 2018 to
obtain input on registration pathways for avapritinib in patients with advanced SM and patients with ISM and SSM. We
anticipate initiating a registration-enabling Phase 2 clinical trial of avapritinib in patients with advanced SM in the first
half of 2018 and a Phase 2 dose escalation and proof-of-concept clinical trial of avapritinib in patients with ISM and
SSM in the second half of 2018. In addition, we continue to enroll patients in the expansion portion of the ongoing
Explorer trial with the goal of generating additional data in 2018.
16
As there is currently no validated patient reported outcome, or PRO, tool for SM, we are collaborating with a
health research outcomes group to develop a disease-specific PRO tool to measure changes in total symptom burden in
patients with advanced SM. We also plan to develop a similar PRO tool for use in clinical trials in patients with indolent
and SSM. In addition, we continue to collaborate with patient advocacy groups to recruit patients to join a patient
registry, which we launched in December 2015 with the goals of improving understanding of SM and increasing patient
participation in SM clinical trials.
FGFR4 Inhibitor Program
Overview
BLU-554 is an orally available, potent, selective and irreversible inhibitor of the kinase FGFR4. FGFR4
functions as a receptor whose aberrant activation is a driver of HCC. FGFR4 belongs to a family of highly homologous
receptors, which include FGFR1-4. BLU-554 targets FGFR4, while sparing the other three FGFR paralogs, and
demonstrates exquisite kinome selectivity. Pre-clinical in vitro and in vivo efficacy data provides a strong rationale for
the development of BLU-554 for the subset of HCC patients whose tumors are driven by aberrant FGFR4 signaling. We
estimate that approximately 30% of patients with HCC have tumors with aberrantly activated FGFR4 signaling, which
we refer to as FGFR4-activated HCC.
HCC Disease Background
Liver cancer is the second leading cause of cancer-related deaths worldwide, and HCC accounts for most liver
cancers. The highest incidence of HCC occurs in regions with endemic hepatitis B virus, or HBV, including Southeast
Asia and sub-Saharan Africa. In the United States, HCC is the fastest rising cause of cancer-related death. Over the past
two decades, the incidence of HCC has tripled while the five-year survival rate has remained below 12%.
Cirrhosis is a key risk factor for HCC — the disease etiology varies by geography with the common theme of
chronic conditions that lead to cirrhosis. In North America, the main risk factors for cirrhosis are infection with hepatitis
C virus, or HCV, followed by HBV infection, alcohol consumption and nonalcoholic steatohepatitis. In the European
Union, the main risk factors for cirrhosis are HCV, HBV and alcohol consumption. In Asia and sub-Saharan Africa, the
major risk factor is chronic HBV infection.
The diagnosis of HCC is typically made in adults, peaking around age 70. Disease management is complicated
by concurrent liver disease, which often compromises liver function in these patients. Patients are staged depending on
extent of liver disease, performance status and liver function status; these factors guide treatment selection. The stage
distribution at diagnosis varies by region. Countries with active national screening programs, such as Taiwan and Japan,
tend to diagnose many more patients in the early stages of disease. There are currently no treatments for molecularly
defined patient subgroups in HCC.
Despite advances in the treatment of HCC, including recent approval of nivolumab and prior approvals of the
multi-kinase inhibitors sorafenib and regorafenib, the prognosis for patients with advanced HCC remains poor and there
is a significant unmet need for new treatments for HCC, including FGFR4-driven HCC. Patients diagnosed at an early
stage receive potentially curative transplant, resection or ablative therapies. Treatments for intermediate to advanced
stage patients include high-dose chemotherapy delivered directly to the liver (transarterial chemoembolization),
sorafenib, nivolumab and regorafenib. Sorafenib, which is approved as a first-line treatment for advanced HCC, is a
multi-kinase inhibitor that targets VEGFR and many other kinases and exhibits anti-angiogenic effects. In a pivotal trial
conducted primarily at European Union and U.S. sites, sorafenib improved median overall survival by approximately
three months, and 2% of patients responded. Nivolumab is an immune checkpoint inhibitor targeting PD-1, which
received accelerated approval from the FDA in September 2017 for second-line advanced HCC based in data from a
pivotal clinical trial showing a 14% object response rate in patients who progressed on or were intolerant to sorafenib.
Regorafenib is approved as a second-line treatment for advanced HCC based on data from a pivotal trial showing
improved median overall survival of 2.8 months and an 11% objective response rate in patients with documented
progression following sorafenib. In clinical practice, patients often require dose modifications or discontinue therapy
with sorafenib and regorafenib due to tolerability issues. There is a clear need for medical therapies with a favorable
risk-benefit profile and the potential be used alone or in combination with other approved or emerging therapies for
advanced HCC.
17
FGFR4 as a Driver in HCC
The link between aberrant FGFR4 signaling and HCC was first established when an amplicon, a region of
replicated DNA, that includes FGF19, the ligand that activates FGFR4, was identified in HCC patients. We estimate that
more than 5% of tumors of HCC patients have this amplicon. The physiologic role of the receptor, FGFR4, and its
ligand, FGF19, is to regulate bile acid metabolism in hepatocytes and liver regeneration following injury. FGF19 is
normally produced in the small intestine and signals to hepatocytes through an endocrine mechanism. FGF19 forms an
active signaling complex together with FGFR4 and its co-receptor Klotho-(cid:533). Signaling of the active complex leads to
decreased CYP7A1 transcription with a resultant decrease in bile acid synthesis, as well as increased growth,
proliferation and survival signals.
FGFR4 Signaling in the Liver
In the figure above, HBV means hepatitis B virus, HCV means hepatitis C virus, NASH means non-alcoholic steatohepatitis and KLB
means Klotho-(cid:533).
Subsequent data suggest that FGFR4 signaling is a driver in a subset of HCC patients in whom the pathway is
aberrantly activated. In these patients, FGF19 is overexpressed in hepatocytes (which do not normally express FGF19),
leading to autocrine signaling and tumor growth. Pre-clinical experiments in a genetically engineered mouse model
demonstrate that exogenous FGF19 expression is sufficient to induce liver tumor growth and that tumorigenesis is
dependent on FGFR4. The three elements that constitute an active FGFR4 signaling complex, FGF19, FGFR4 and
Klotho-(cid:533), are expressed together uniquely in HCC, although it is possible that they may also occur in rare cases of other
solid tumors.
We have used our novel drug discovery platform to identify a potentially broader target responder population in
addition to the FGF19-amplified patient population. We estimate that approximately 25% of HCC tumors overexpress
FGF19 without amplification. We have also demonstrated a significant anti-tumor response with an FGFR4 inhibitor in
an HCC patient-derived xenograft model that overexpresses FGF19 in the absence of amplification. Some of these
results were published in Cancer Discovery in 2015. We estimate that approximately 30% of patients have FGFR4-
activated HCC, and data suggest patients with HCC patients with FGFR4 pathway activation resulting in activation of
the FGFR4 pathway generally have poor outcomes relative to other HCC patients.
The FGFR4 signaling pathway is a promising new driver for the development of molecularly targeted therapy
in HCC. In the Major Markets, we estimate there are approximately 28,100 first and second line patients with FGFR4-
activated HCC.
18
BLU-554 Pre-clinical Development in HCC
Efforts to discover selective, reversible inhibitors of FGFR4 have been challenging given the high sequence
similarity among the four FGFR paralogs. A cysteine located near the ATP binding site in FGFR4 is unique among the
paralogs. We therefore focused on developing a covalent inhibitor with paralog specificity and kinome selectivity. Our
team of experienced medicinal chemists applied structure-based design principles to develop a potent and selective
FGFR4 inhibitor starting from known FGFR inhibitor templates. This effort yielded our development candidate,
BLU-554. We have conducted comprehensive in vitro experiments to characterize the potency and selectivity of
BLU-554. BLU-554 potently inhibits FGFR4 enzyme activity (IC50 = 5 nM) and inhibits the activity of FGFR1-3 at least
100-fold less potently (IC50 (cid:149) 600 nM). In contrast, pan-FGFR inhibitors such as BGJ-398 fail to exhibit paralog
specificity. The selectivity of BLU-554 was further evaluated by profiling BLU-554 at a concentration of 3 μM across a
panel of over 450 kinases and disease relevant kinase mutants using KINOMEscan methodology. BLU-554 displayed
significant binding (greater than 90% inhibition relative to control) only to FGFR4 in this assay. In contrast, BGJ-398
significantly bound to 14 kinases (greater than 90% inhibition relative to control).
Paralog selectivity of BLU-554 compared to the pan-FGFR inhibitor BGJ-398. The inhibitory potency of BLU-554 and BGJ-398 against
each of the FGFR paralogs was evaluated in an in vitro enzyme activity assay.
Kinome selectivity of BLU-554 as determined using the KINOME scan assay. BLU-554 was screened at 3 μM against a panel of over 450
kinases and disease-relevant mutants. Each branch of the dendogram represents an individual human kinase. Kinases bound by the
compound are indicated by red circles on the kinome tree. The degree of binding corresponds to the size of the circle. Kinome illustration
reproduced courtesy of CSTI (www.cellsignal.com). The foregoing website is maintained by CSTI, and Blueprint Medicines is not
responsible for its content.
We demonstrated significant anti-tumor efficacy with BLU-554 in two in vivo HCC xenograft models where
tumor growth is driven by FGFR4 signaling. BLU-554 administered orally for 21 days resulted in robust and
dose-dependent growth inhibition of Hep3B tumors, an FGF19-amplified model. At a dose of 100 mg/kg BID, a
well-tolerated dose, BLU-554 induced complete remission in a subset of mice for at least 30 days after cessation of
treatment. We observed a correlation between the concentration of BLU-554 in mouse plasma and the level of
expression of CYP7A1, a downstream biomarker, in the tumor. At the 100 mg/kg BID dose, significant induction of
CYP7A1 expression was seen, which is an expected consequence of inhibiting FGFR4 signaling. This correlation
between BLU-554 plasma concentration, the level of induction of CYP7A1 expression and anti-tumor efficacy supports
that the observed anti-tumor response is due to inhibition of FGFR4 signaling.
19
BLU-554 elicits dose-dependent tumor inhibition in the Hep3B tumor xenograft mouse model, a model of FGF19 amplification. In the
figure above, BID means twice a day and PO means orally.
Aberrant FGFR4 signaling can also be driven by FGF19 overexpression in the absence of amplification. Hence,
we have also evaluated the anti-tumor efficacy of BLU-554 in a patient-derived xenograft model driven by FGF19
overexpression in the absence of amplification. Treatment with BLU-554 led to dose-dependent tumor growth inhibition.
The anti-tumor efficacy of sorafenib, the only approved systemic treatment for HCC, was also evaluated in this study.
Sorafenib dosed once daily at 40 mg/kg, a dose that led to body weight loss in the mice, had only a modest effect on
tumor growth.
BLU-554 elicits dose-dependent tumor inhibition in a patient-derived tumor xenograft mouse model in which tumor growth is driven by
FGF19 overexpression in the absence of FGF19 amplification. In the figure above, QD means once a day, BID means twice a day and
PO means orally.
Taken together, the data presented above indicate that potent and selective FGFR4 inhibition leads to robust
anti-tumor effects in in vivo models where tumor growth is driven by FGF19 amplification or FGF19 overexpression in
the absence of amplification.
These findings, together with our estimate that approximately 30% of patients with HCC have tumors with
aberrantly activated FGFR4 signaling, provide critical information to identify a potential responder population and
informed patient selection criteria in our Phase 1 clinical trial.
Phase 1 Clinical Trial for Patients with Advanced HCC
BLU-554 is currently being evaluated in the dose expansion portion of a Phase 1 clinical trial in patients with
advanced HCC at the MTD of 600 mg QD, and enrollment is ongoing. In October 2017, we presented updated data from
this ongoing clinical trial at European Society of Medical Oncology 2017 Congress.
As of the data cutoff of August 18, 2017, 77 patients had been treated with BLU-554 in the dose escalation and
expansion portions of the Phase 1 clinical trial at five dose levels (ranging from 140 mg QD to 900 mg QD), including
44 patients with FGFR4-activated HCC. FGFR4-activated HCC was defined as at least one percent tumor expression of
FGF19, the FGFR4 ligand, as measured by an immunohistochemistry, or IHC, assay. In general, the enrolled population
was heavily pretreated: 82% received prior TKI treatment, 23% received prior immunotherapy and 91% received prior
systemic therapy. PK analysis demonstrated rapid oral absorption across all dose levels, with a mean half-life of
20
approximately 17 hours and exposure in the expected therapeutic range based on HCC xenograft models. Collectively,
we believe that these data support a once-daily dosing regimen.
Safety Data. As of the data cutoff of August 18, 2017, the majority of AEs reported by investigators were
Grade 1 or 2. Across all grades, the most common AEs reported by investigators related to BLU-554 included diarrhea
(71%), nausea (42%), vomiting (36%), transaminase elevation (AST 34% and ALT 32%) and fatigue (29%). Grade 3 or
higher AEs related to BLU-554 occurring in five or more patients included anemia, diarrhea and transaminase elevation
(AST and ALT). Among all 77 patients treated with BLU-554, 58 patients discontinued treatment with BLU-554,
including 42 patients due to disease progression, 11 patients due to treatment-related AEs, three patients who withdrew
consent and two patients due to the investigator’s decision.
Clinical Activity Data. As of the data cutoff of August 18, 2017, 67 patients were evaluable for response
assessment. An additional 10 patients were treated with BLU-554 as of the data cutoff date but were not evaluable for
response assessment. Response was assessed using the Response Evaluation Criteria In Solid Tumors, or RECIST,
version 1.1.
In patients with FGFR4-activated HCC (n=38), the data showed an ORR of 16% (95% confidence interval
6-31%). In addition, 49% of patients had radiographic tumor reduction, and clinical activity was observed regardless of
disease etiology or geography. As of the data cutoff date:
• One patient had an unconfirmed complete response.
• Five patients had a partial response, with four confirmed and one unconfirmed.
• An additional 20 patients had stable disease, representing a disease control rate of 68%.
• No responses were observed in patients without FGFR4 pathway activation (n=29).
Among all 77 patients treated with BLU-554, 19 remained on treatment as of the data cutoff date, including
15 patients with FGFR4-activated HCC. Median progression-free survival was 3.7 months among patients with FGFR4-
activated HCC.
In addition, five TKI-naïve patients with FGFR4-activated HCC were evaluable for response assessment as of
the data cutoff date. Within this group, preliminary evidence of prolonged disease control was observed. Two TKI-naïve
patients remain on treatment as of the data cutoff date with a duration of treatment of 11.4 months and 12.3 months,
respectively.
Phase 1 Clinical Trial Design. This Phase 1 clinical trial is designed to evaluate the safety and tolerability of
BLU-554 in adults with advanced HCC. The trial consists of two parts: a dose escalation portion and an expansion
portion. We have completed the dose escalation portion, and patient enrollment in the dose expansion portion is
currently ongoing at the MTD of 600 mg QD. The expansion portion of the trial is designed to enroll patients in the
following cohorts: (1) three subsets of patients with HCC, regardless of prior therapy, and (2) patients with FGFR4-
activated HCC who have not been previously treated with a TKI, which we refer to as the TKI-naïve cohort. The
primary objective of the expansion portion of the Phase 1 clinical trial is to continue to evaluate the safety and
tolerability of BLU-554. Secondary objectives include assessing clinical activity by RECIST version 1.1, as well as
evaluating the PK of BLU-554 and pharmacodynamic markers of BLU-554 activity. The Phase 1 clinical trial is
designed to enroll approximately 150 patients, including approximately 40 patients during dose escalation and
approximately 110 patients across both expansion cohorts, at multiple sites in the United States, European Union and
Asia.
Clinical Development Plans
In September 2015, the FDA granted orphan drug designation to BLU-554 for the treatment of HCC. We plan
to report updated data from the expansion portion of our ongoing Phase 1 clinical trial for advanced HCC, including
preliminary data from the TKI-naïve cohort, in the second half of 2018. We also plan to explore opportunities to conduct
a clinical trial to evaluate BLU-554 in combination with an immune checkpoint inhibitor.
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RET Program
Overview
BLU-667 is an orally available, potent selective inhibitor of the kinase RET, including activating RET fusions
and mutations and predicted RET resistance mutations. RET is a receptor tyrosine kinase that activates multiple
downstream pathways involved in cell proliferation and survival. RET can be activated by mutation or when a portion of
the RET gene that encodes the kinase domain is joined to part of another gene creating a fusion gene that encodes an
aberrantly activated RET fusion protein. RET activating mutations are implicated in MTC (approximately 60% of
patients), and RET fusions are implicated in several cancers, including papillary thyroid carcinoma (approximately 10%
of patients) and NSCLC (1-2% of patients). Our genomics analyses on the landscape of kinase fusions, published in
Nature Communications in 2014, identified RET fusions in breast and colon cancer patient samples (both <1% of
patients), providing a therapeutic rationale for the use of RET inhibitors in multiple patient subpopulations.
The identification of RET fusions as drivers in some cancers prompted the use of approved multi-kinase
inhibitors with RET inhibitory activity to treat patients whose tumors express a RET fusion protein. However, we
believe these drugs cannot be dosed at levels required to sufficiently inhibit RET due to toxicities that result from
inhibition of the primary targets. For example, currently approved therapies such as vandetanib and cabozantinib
demonstrate lower objective response rates and duration of response in patients with RET-altered NSCLC compared to
selective kinase inhibitors targeting other kinase drivers such as EGFR, ALK and ROS1.
Further, one of the greatest challenges in treating cancer is the ability of tumor cells to become resistant to
therapy. Kinase reactivation via mutation to evade small molecule inhibition is a common mechanism of resistance. We
have predicted future resistance mutations of drugs with RET inhibitory activity. Thus, there is a clear need for a
selective RET inhibitor that targets both oncogenic RET fusions and activating mutations and their predicted RET
resistance mutations. In the Major Markets, we estimate there are approximately 10,200 patients with RET-driven
NSCLC and approximately 780 patients with RET-driven MTC.
BLU-667 Pre-Clinical Development in RET
BLU-667 was specifically designed to target oncogenic RET fusions and activating mutations and predicted
RET resistance mutations, while sparing anti-targets such as VEGFR-2. We have conducted pre-clinical experiments in
biochemical and cellular assays to characterize the potency of BLU-667 against these targets. In a panel comparing
BLU-677 with the commonly used multi-kinase inhibitors cabozantinib and vandetanib and the development candidate
RXDX-105, BLU-667 was the only compound to demonstrate sub-nanomolar selectivity for wild-type RET and
predicted resistance mutations at the gatekeeper (V804) residue. In addition, BLU-667 selectivity was assessed in a
biochemical screen of a broad panel of over 350 kinases and demonstrated approximately 90-fold selectivity for wild-
type RET over VEGFR-2.
Biochemical IC50 (nM)
Wild-
type
RET
0.4
11
4
3
BLU-667
cabozantinib
vandetanib
RXDX-105
RET
V804L
RET
V804M
RET
M918T
CCCDC6-
RET
VEGFR-
2
0.3
45
3597
188
0.4
162
726
102
0.4
8
7
4
0.4
34
20
7
35
2
4
17
IC50 Ratio
(VEGFR-2 /
RET)
88x
0.2x
1x
6x
Potency of BLU-667 against wild-type RET, predicted RET resistant mutants and the anti-target VEGFR-2 compared to a panel of
multi-kinase inhibitors with RET inhibitory activity. The inhibitory potencies of BLU-667 and the multi-kinase inhibitors against wild-type
RET, RET resistant mutants and VEGFR2 were evaluated in in vitro enzyme activity assays. The inhibitory potencies of these compounds
were also evaluated in cell lines driven by either a wild-type RET fusion or a mutant RET fusion.
We have demonstrated significant anti-tumor efficacy with BLU-667 in both a KIF5b-RET fusion allograft and
a KIF5b-RET (V804L) resistant mutant allograft. Administration of BLU-667 orally twice daily for 14 days in a
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wild-type RET fusion allograft and for 14 days in a predicted RET resistant mutant allograft resulted in robust and
dose-dependent tumor growth inhibition. At a dose of 30 mg/kg twice daily, a well-tolerated dose, the compound
induced tumor regression in both models. The anti-tumor efficacy of a multi-kinase inhibitor with RET inhibitory
activity that is being evaluated in the clinic for treatment of patients with RET fusion positive lung cancer (reference
compound) was also evaluated in these models. This reference compound, dosed orally once daily at 60 mg/kg, a
well-tolerated dose, inhibited tumor growth in the wild-type RET fusion allograft. At the same dose level in the RET
resistant mutant allograft, this reference compound showed diminished inhibition of tumor growth.
BLU-667, a RET inhibitor, elicits dose dependent tumor growth inhibition in both a KIF5b-RET fusion allograft (left figure)) and a KIF5b-
RET (V804L) resistant mutant allograft model (right figure). In the figure above, BID means twice a day, and QD means once a day.
Phase 1 Clinical Trial for Patients with RET-Altered NSCLC, MTC and Other Advanced Solid Tumors
BLU-667 is currently being evaluated in the dose escalation portion of a Phase 1 clinical trial in patients with
RET-altered NSCLC, MTC and other advanced solid tumors, and enrollment is ongoing. As of December 1, 2017,
30 patients had been enrolled in the dose escalation portion of the trial. BLU-667 has been generally well-tolerated to
date, and the majority of AEs reported by investigators were Grade 1. We have not identified an MTD or RP2D.
Investigators have reported preliminary evidence of clinical activity in patients with NSCLC, including patients with
KIF5B and other RET fusions, and RET-altered MTC. We plan to report preliminary data from this clinical trial and
initiate the expansion portion in the first half of 2018.
Phase 1 Clinical Trial Design. This Phase 1 clinical trial is designed to evaluate the safety and tolerability of
BLU-667 in multiple ascending doses in adults with RET-altered NSCLC, MTC and other advanced solid tumors. The
trial consists of two parts: a dose escalation portion and an expansion portion. The goal of the dose escalation portion is
to establish an MTD or a recommended dose if the MTD is not achieved. Once the MTD is reached or a recommended
dose is established, we plan to open expansion cohorts for the following four patient groups: (1) NSCLC patients with a
RET rearrangement who have undergone prior treatment with a TKI that inhibits RET, (2) NSCLC patients with a RET
rearrangement who have not been previously treated with a TKI that inhibits RET, (3) patients with MTC and
(4) patients with RET-altered solid tumors, other than NSCLC and MTC. Secondary objectives for this trial include
assessing the PK profile of BLU-667, assessing RET gene status in plasma and tumor tissue, characterizing the PD of
BLU-667 and assessing response rate by RECIST. The Phase 1 clinical trial is designed to enroll approximately
115 patients, including approximately 35 patients during dose escalation and approximately 80 patients across all four
expansion cohorts, at multiple sites in the United States and the European Union.
Collaboration with Roche
In March 2016, we entered into the Roche agreement pursuant to which we and Roche have agreed to
collaborate on the discovery, development and commercialization of up to five small molecule therapeutics targeting
kinases believed to be important in cancer immunotherapy, as single products or possibly in combination with other
therapeutics. The parties are currently conducting activities for up to five programs under the collaboration, including up
to two collaboration programs leveraging our novel target discovery engine and proprietary compound library to select
potential targets.
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Under the Roche agreement, Roche is granted up to five option rights to obtain an exclusive license to exploit
products derived from the collaboration programs, or licensed products, in the field of cancer immunotherapy. Such
option rights are triggered upon the achievement of Phase 1 proof-of-concept. For up to three of the five collaboration
programs, if Roche exercises its option, Roche will receive worldwide, exclusive commercialization rights for the
licensed products. For up to two of the five collaboration programs, if Roche exercises its option, we will retain
commercialization rights in the United States for the licensed products, and Roche will receive commercialization rights
outside of the United States for the licensed products. We will also retain worldwide rights to any products for which
Roche elects not to exercise its applicable option. Prior to Roche’s exercise of an option, we will have the lead
responsibility for drug discovery and pre-clinical development of all collaboration programs. In addition, we will have
the lead responsibility for the conduct of all Phase 1 clinical trials other than those Phase 1 clinical trials for any product
in combination with Roche’s portfolio of therapeutics, for which Roche will have the right to lead the conduct of such
Phase 1 clinical trials. Pursuant to the Roche agreement, the parties will share the costs of Phase 1 development for each
collaboration program. In addition, Roche will be responsible for post-Phase 1 development costs for each licensed
product for which it retains global commercialization rights, and we and Roche will share post-Phase 1 development
costs for each licensed product for which we retain commercialization rights in the United States.
We received an upfront cash payment of $45.0 million in March 2016 upon execution of the Roche agreement,
and subject to the terms of the Roche agreement, we will be eligible to receive up to approximately $965.0 million in
contingent option fees and milestone payments related to specified research, pre-clinical, clinical, regulatory and sales-
based milestones. Of the total contingent payments, up to approximately $215.0 million are for option fees and milestone
payments for research, pre-clinical and clinical development events prior to licensing across all five potential
collaboration programs, including contingent milestone payments for initiation of each of the collaboration programs for
which the parties will work together to select targets. In addition, for any licensed product for which Roche retains
worldwide commercialization rights, we will be eligible to receive tiered royalties ranging from low double-digits to
high-teens on future net sales of the licensed product. For any licensed product for which we retain commercialization
rights in the United States, we and Roche will be eligible to receive tiered royalties ranging from mid-single-digits to
low double-digits on future net sales in the other party’s respective territories in which it commercializes the licensed
product. The upfront cash payment and any payments for milestones, option fees and royalties are non-refundable, non-
creditable and not subject to set-off.
Under the Roche agreement, each party has granted the other party specified intellectual property licenses to
enable the other party to perform its obligations and exercise its rights under the Roche agreement, including license
grants to enable each party to conduct research, development and commercialization activities pursuant to the terms of
the Roche agreement. Following Roche’s exercise of its option with respect to the collaboration programs for which it
will obtain worldwide rights, we will grant Roche an exclusive license under our intellectual property to develop and
commercialize the licensed products generated through such collaboration program. Similarly, Roche will grant us an
exclusive license under Roche’s intellectual property to develop and commercialize licensed products in the United
States for the collaboration programs on which we will retain rights in the United States, with Roche receiving a license
under our intellectual property to develop and commercialize such licensed products outside of the United States.
Subject to the terms and conditions of the Roche agreement, we have agreed to work exclusively with Roche
with respect to each collaboration target, and we have agreed to work exclusively within the field of cancer
immunotherapy for a period of up to 30 months after the execution of the Roche agreement. In addition, subject to
specified exceptions, Roche has a right of first negotiation in the event that we desire to grant any third party rights to
develop or commercialize a licensed product under either of the collaboration programs for which we will retain
commercialization rights in the United States. Roche’s right of first negotiation will not apply in connection with a
change of control of us, an assignment by us in accordance with the terms of the Roche agreement or certain agreements
with contract research organizations, contract manufacturing organizations, academic institutions, not-for-profit third
parties or distributors.
The Roche agreement will continue until the date when no royalty or other payment obligations are or will
become due, unless earlier terminated in accordance with the terms of the Roche agreement. Prior to its exercise of its
first option, Roche may terminate the Roche agreement at will, in whole or on a collaboration target-by-collaboration
target basis, upon 120 days’ prior written notice to us. Following its exercise of an option, Roche may terminate the
Roche agreement at will, in whole, on a collaboration target-by-collaboration target basis, on a collaboration program-
by-collaboration program basis or, if a licensed product has been commercially sold, on a country-by-country basis,
(i) upon 120 days’ prior written notice if a licensed product has not been commercially sold or (ii) upon 180 days’ prior
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written notice if a licensed product has been commercially sold. Either party may terminate the Roche agreement for the
other party’s uncured material breach or insolvency and in certain other circumstances agreed to by the parties. In certain
termination circumstances, we are entitled to retain specified licenses to be able to continue to exploit the licensed
products.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual
property protection for our drug candidates, including avapritinib, BLU-554, BLU-667 and BLU-782, and our core
technologies, including our novel target discovery engine and our proprietary compound library, and other know-how; to
operate without infringing on the proprietary rights of others; and to prevent others from infringing 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., international 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 trade
secrets, know-how and continuing technological innovation to develop and maintain our proprietary and intellectual
property position.
We file patent applications directed to our drug candidates in an effort to establish intellectual property
positions regarding these new chemical entities as well as uses of these new chemical entities in the treatment of
diseases. We also file patent applications directed to novel fusions that we have discovered through our target discovery
engine and the use of these fusions in diagnosing and treating disease. As of February 15, 2018, we owned ten issued
U.S. patents, 25 pending U.S. patent applications, 5 pending U.S. provisional applications, 87 foreign patent applications
pending in a number of jurisdictions, including Australia, Brazil, Canada, China, the European Union, Israel, India,
Japan, South Korea, Mexico New Zealand, Russia, South Africa, three issued foreign patents, and nine pending Patent
Cooperation Treaty, or PCT, patent applications. Our pending patent applications pertain to our key research and
development programs, specifically our programs for avapritinib, BLU-554, BLU-667 and BLU-782, and our pipeline,
specifically novel recurrent fusions. Our issued U.S. patents are projected to expire between 2033 and 2034, and any
patents that may issue from our pending U.S. applications would be projected to expire between 2034 and 2037.
The intellectual property portfolios for our most advanced drug candidates as of February 15, 2018 are
summarized below. Each of these portfolios is in its early stages and, with respect to some of the pending patent
applications covering our drug candidates, prosecution has just begun or is in progress. Prosecution is a lengthy process,
during which the scope of the claims initially submitted for examination by the USPTO often significantly narrowed by
the time they issue, if they issue at all. We expect this to be the case with respect to our pending patent applications
referred to below.
Avapritinib (KIT and PDGFR(cid:302))
The intellectual property portfolio for our avapritinib program contains patent applications directed to
compositions of matter for avapritinib and analogs, compositions of matter for KIT inhibitors with different compound
families, as well as methods of use for these novel compounds. As of February 15, 2018, we owned five issued US
patents, four pending U.S. patent applications, 36 pending foreign patent applications in a number of jurisdictions,
including Argentina, Australia, Bolivia, Brazil, Canada, China, the European Union, Israel, India, Japan, South Korea,
Mexico New Zealand, Pakistan, Russia, South Africa, Taiwan and Venezuela, one pending PCT patent application and
two U.S. provisional applications directed to our KIT and PDGFR(cid:302) program, including avapritinib. Any U.S. or ex-U.S.
patents issuing from the pending applications covering avapritinib will have a statutory expiration date of October 2034.
Patent term adjustments or patent term extensions could result in later expiration dates.
BLU-554 (FGFR4)
The intellectual property portfolio for our BLU-554 program contains patent applications directed to
compositions of matter for BLU-554 and analogs, as well as compositions of matter for FGFR4 inhibitors with multiple
compound families. The portfolio also includes patent applications directed to methods of use for the novel compounds
as well as patent applications directed broadly to FGFR4 selective inhibitors. As of February 15, 2018, we owned four
issued U.S. patents, three pending U.S. patent applications, one pending U.S. provisional application, one pending PCT
international application, 41 foreign patent applications in a number of jurisdictions, including Australia, Brazil, Canada,
China, the European Union, Israel, India, Japan, South Korea, Mexico New Zealand, Russia, South Africa and Taiwan,
and three issued foreign patents directed to our FGFR4 program, including BLU-554. Any U.S. or ex-U.S. patent issuing
25
from the pending applications covering BLU-554 will have a statutory expiration date of July 2033, December 2033,
October 2034 or September 2037. Patent term adjustments or patent term extensions could result in later expiration
dates.
BLU-667 (RET)
The intellectual property portfolio for our BLU-667 program contains patent applications directed to
compositions of matter for BLU-667 and analogs, compositions of matter for other inhibitors of predicted RET
resistance mutations and methods of use for these novel compounds. As of February 15, 2018, we owned five pending
U.S. patent applications, four pending PCT applications, six pending foreign patent applications filed in Argentina,
Lebanon, Uruguay and Taiwan, and one pending provisional U.S. patent applications directed to our RET program,
including BLU-667, which, if issued, will have statutory expiration dates of 2036 or 2037.
BLU-782 (ALK2)
The intellectual property portfolio for our BLU-782 program contains patent applications directed to
compositions of matter for BLU-782 and analogs, compositions of matter for other inhibitors with different compound
families and methods of use for these novel compounds. As of February 15, 2018, we owned one pending U.S. patent
application, one pending U.S. provisional patent application and one pending PCT international application directed
to our ALK2 program, including BLU-782, which, if issued, will have statutory expiration dates of April 2037 or
October 2038.
Platform
The intellectual property portfolio directed to our platform includes patent applications directed to novel gene
fusions and the uses of these fusions for detecting and treating conditions implicated with these fusions. As of February
15, 2018, we owned ten pending U.S. patent applications and ten pending European Union patent applications directed
to this technology, which, if issued, will have statutory expiration dates ranging from 2034 to 2035.
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. In the United States, a patent’s term may be lengthened by patent term adjustment,
which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or 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. See “— Government Regulation — U.S.
Patent Term Restoration and Marketing Exclusivity” below for additional information on such exclusivity. In the future,
if and when our drug candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for
patent term extensions on issued patents covering those drugs, depending upon the length of the clinical trials for each
drug 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.
As with other biotechnology and pharmaceutical companies, our ability to maintain and solidify our proprietary
and intellectual property position for our drug candidates and technologies will depend on our success in obtaining
effective patent claims and enforcing those claims if granted. However, our pending patent applications, and any patent
applications that we may in the future 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, we cannot be certain of the priority
of inventions covered by pending third-party patent applications. If third parties prepare and file patent applications in
the United States that also claim technology or therapeutics to which we have rights, we may have to participate in
interference proceedings in the USPTO to determine priority of invention, which could result in substantial costs to us,
even if the eventual outcome is favorable to us, which is highly unpredictable. In addition, because of the extensive time
required for clinical development and regulatory review of a drug candidate we may develop, it is possible that, before
any of our drug candidates can be commercialized, any related patent may expire or remain in force for only a short
period following commercialization, thereby limiting protection such patent would afford the respective product and any
competitive advantage such patent may provide.
26
In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological
innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, by
executing confidentiality agreements with our collaborators and scientific advisors, and non-competition,
non-solicitation, confidentiality, and invention assignment agreements with our employees and consultants. We have
also executed agreements requiring assignment of inventions with selected scientific advisors and collaborators. The
confidentiality agreements we enter into are designed to protect our proprietary information and the agreements or
clauses requiring assignment of inventions to us are designed to grant us ownership of technologies that are developed
through our relationship with the respective counterparty. We cannot guarantee, however, that these agreements will
afford us adequate protection of our intellectual property and proprietary information rights.
With respect to the building of our proprietary compound library, we consider trade secrets and know-how to be
our primary intellectual property. Trade secrets and know-how can be difficult to protect. In particular, we anticipate that
with respect to our discovery platform, these trade secrets and know-how will over time be disseminated within the
industry through independent development and public presentations describing the methodology.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense
competition and a strong emphasis on proprietary drugs. 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. Any drug candidates that we successfully
develop and commercialize will compete with existing drugs and new drugs that may become available in the future.
We compete in the segments of the pharmaceutical, biotechnology and other related markets that address
inhibition of kinases in cancer and other rare genetic diseases. There are other companies working to develop therapies
in the field of kinase inhibition for cancer and other diseases. These companies include divisions of large pharmaceutical
companies and biotechnology companies of various sizes.
Many of the companies against which we are competing or against which we may compete in the future have
significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved drugs 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. Smaller or early stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. 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 technologies
complementary to, or necessary for, our programs.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than
any drugs that we or our collaborators may develop. Our competitors also may obtain FDA or other regulatory approval
for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a
strong market position before we or our collaborators are able to enter the market. The key competitive factors affecting
the success of all of our drug candidates, if approved, are likely to be their efficacy, safety, convenience, price, the
effectiveness of companion diagnostic tests in guiding the use of related therapeutics, the level of generic competition
and the availability of reimbursement from government and other third-party payors.
If our drug candidates are approved for the indications for which we are currently conducting or planning
clinical trials, they will compete with the drugs discussed below and will likely compete with other drugs that are
currently in development.
avapritinib
We are initially developing avapritinib, which is designed to target KIT and PDGFR(cid:302) mutations, for patients
with advanced GIST and advanced SM. If avapritinib receives marketing approval for advanced SM, it will face
competition from Novartis AG’s midostaurin, a multi-kinase inhibitor with KIT D816V inhibitory activity that was
27
approved in April 2017 by the FDA for the treatment of advanced SM. If avapritinib receives marketing approval for
third line advanced GIST, it will face competition from Bayer AG’s regorafenib, and if avapritinib receives marketing
approval for second line advanced GIST, it will face competition from Pfizer Inc.’s sunitinib. In addition, if avapritinib
receives marketing approval for advanced SM, GIST and/or for GIST patients with the PDGFR(cid:302) D842V mutation, it
may face competition from other drug candidates in development for these indications, including drug candidates in
development by AB Science S.A., ARIAD Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical
Company Limited, AROG Pharmaceuticals, Inc., Celldex Therapeutics, Inc., Deciphera Pharmaceuticals, LLC and
Plexxikon Inc., a wholly-owned subsidiary of Daiichi Sankyo Company, Limited.
BLU-554
We are initially developing BLU-554 for patients with advanced HCC driven by FGFR4. If BLU-554 receives
marketing approval for patients with FGFR4-activated HCC, it will face competition from Bristol-Myers Squibb
Company’s nivolumab, an immune checkpoint inhibitor, which was approved in September 2017 by the FDA for the
treatment of HCC, as well as sorafenib and regorafenib, multi-kinase inhibitors for the treatment of HCC. In addition,
BLU-554 may face competition from other drug candidates in development by Abbisko Therapeutics Co., Ltd,
AstraZeneca plc, Bayer AG, Celgene Corporation, Eisai Inc., H3 Biomedicine Inc., Incyte Corporation, Johnson &
Johnson, Novartis AG, Sanofi S.A., Taiho Pharmaceutical Co., Ltd., U3 Pharma GmbH, a wholly-owned subsidiary of
Daiichi Sankyo Company, Limited, and Xoma Ltd.
BLU-667
We are initially developing BLU-667 for patients with RET-driven NSCLC, MTC and other advanced solid
tumors. If BLU-667 receives marketing approval for RET-driven NSCLC, MTC or other advanced solid tumors, it may
face competition from drug candidates in development by Loxo Oncology, Inc. and Mirati Therapeutics, as well as
several approved multi-kinase inhibitors with RET activity being evaluated in clinical trials, including alectinib, apatinib,
cabozantinib, dovitinib, lenvatinib, ponatinib, sorafenib, sunitinib and vandetinib.
BLU-782
We are initially developing BLU-782 for patients with FOP. If BLU-782 receives marketing approval for FOP,
it may face competition from drug candidates in development by BioCryst Pharmaceuticals, Inc., Clementia
Pharmaceuticals Inc. and Regeneron Pharmaceuticals, Inc.
Commercialization Plans
Our goal is to become a fully-integrated biopharmaceutical company capable of delivering transformative drugs
to patients. Given our stage of development, we have started to establish our own commercial organization and
distribution capabilities. Our initial focus is on genomically defined patient populations in oncology and a rare disease,
which we believe will allow us to efficiently commercialize our drug candidates in the United States on our own initially
and worldwide longer-term. We currently have worldwide development and commercialization rights to avapritinib,
BLU-554, BLU-667 and BLU-782 and all of our discovery programs other than the pre-clinical programs under the
Roche collaboration. Subject to obtaining regulatory approval, we believe that we may be able to commercialize one or
more of our drug candidates in as little as five years from when we select a development candidate. In addition, subject
to regulatory approval, we believe we can successfully launch and commercialize our initial drug candidates on our own,
using a small and highly specialized sales force similar to those of other rare disease companies. However, we may
establish collaborations with pharmaceutical companies to leverage their capabilities to maximize the potential of our
drug candidates.
Under the terms of our agreements related to the development and commercialization of companion diagnostic
tests, third parties are responsible for the commercialization of companion diagnostic tests for avapritinib in order to
identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4
pathway activation and BLU-667 in order to identify NSCLC patients with RET fusions.
28
Manufacturing and Supply
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently
rely, and expect to continue to rely, on third parties for the manufacture of our drug candidates for pre-clinical and
clinical testing, as well as for commercial manufacture of any drugs that we may commercialize. To date, we have
obtained active pharmaceutical ingredients, or API, or drug substance for avapritinib, BLU-554, BLU-667 and BLU-782
for our pre-clinical and Phase 1 testing from one third-party manufacturer and drug product from two third party
manufacturers. We obtain our supplies from these manufacturers on a purchase order basis and do not have a long-term
supply arrangement in place. We do not currently have arrangements in place for redundant supply for API, drug product
or drug substance. For all of our drug candidates, we intend to identify and qualify additional manufacturers to provide
the API, drug product and drug substance prior to submission of a new drug application to the FDA and/or a marketing
authorization application to the European Medicines Agency.
Our drug candidates avapritinib, BLU-554, BLU-667 and BLU-782 are 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 developing drug candidates that can be produced cost-effectively at
contract manufacturing facilities.
Under the terms of our agreements related to the development and commercialization of companion diagnostic
tests, we will rely on third parties to develop and commercialize companion diagnostic tests for avapritinib in order to
identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4
pathway activation and BLU-667 in order to identify NSCLC patients with RET fusions. We generally expect to rely on
third parties for the manufacture of any other companion diagnostic tests we may seek to develop.
Government Regulation
Government authorities in the United States at the federal, state and local level and in other countries
extensively regulate, among other things, the research and clinical development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring
and reporting, marketing, and export and import of drug products, such as those we are developing. Generally, before a
new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized
into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state,
local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to
comply with the applicable regulatory requirements at any time during the product development process, approval
process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include,
among other actions, the regulatory authority’s refusal to approve pending applications, withdrawal of an approval,
clinical holds, untitled or warning letters, voluntary product recalls or withdrawals from the market, product seizures,
total or partial suspension of production or distribution, injunctions, debarment, fines, refusals of government contracts,
restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material
adverse effect on us.
U.S. Drug Development
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and
its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. Our drug
candidates must be approved by the FDA through the NDA process before they may be legally marketed in the United
States. The process required by the FDA before a drug may be marketed in the United States generally involves the
following:
•
completion of extensive nonclinical tests, sometimes referred to as pre-clinical laboratory tests, animal
studies and formulation studies performed in accordance with applicable regulations, including the
FDA’s GLP regulations;
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•
•
•
•
•
•
submission to the FDA of an IND, which must become effective before human clinical trials may
begin and must be actively maintained, including by submitting annual reports;
performance of adequate and well-controlled human clinical trials in accordance with applicable IND
and other clinical trial-related regulations, sometimes referred to as good clinical practices, or GCPs, to
establish the safety and efficacy of the proposed drug for its proposed indication;
submission to the FDA of an NDA for a new drug;
a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at
which the API and finished drug product are produced to assess compliance with the FDA’s current
good manufacturing practice requirements, or cGMP;
potential FDA audit of the pre-clinical study sites and/or clinical trial sites that generated the data in
support of the NDA; and
• FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the
United States.
The data required to support an NDA is generated in two distinct development stages: pre-clinical and clinical.
For new chemical entities, the pre-clinical development stage generally involves synthesizing the active component,
developing the formulation and determining the manufacturing process, as well as carrying out non-human toxicology,
pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing. The conduct of
the pre-clinical tests must comply with federal regulations, including GLPs. The sponsor must submit the results of the
pre-clinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a
proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to
administer an investigational drug product to humans. The central focus of an IND submission is on the pre-clinical data,
general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials and places the
IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns or questions before the clinical trial can begin. The FDA may also impose clinical holds on a drug
candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot
be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will
not arise that could cause the trial to be suspended or terminated.
The clinical stage of development involves the administration of the drug candidate to healthy volunteers and/or
patients under the supervision of qualified investigators, generally physicians not employed by or under the trial
sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects provide their
informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and
the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments
to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and
approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial
will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items
as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to
anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial
subject or his or her legal representative and must monitor the clinical trial until completed. There are also requirements
governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.
Clinical trials are generally conducted in three sequential phases that may overlap or be combined, known as
Phase 1, Phase 2 and Phase 3 clinical trials. Phase 1 clinical trials for oncology indications generally involve a small
number of disease-affected patients who are treated with the drug candidate in escalating dose cohorts. The primary
purpose of these clinical trials is to determine the MTD, or a recommended dose if the MTD is not achieved, assess the
PK profile, pharmacologic action, side effect tolerability and safety of the drug. Phase 1 clinical trials for oncology
indications may also evaluate preliminary evidence of clinical activity. Phase 2 clinical trials typically involve studies in
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disease-affected patients to determine the dose required to produce the desired benefits. At the same time, safety and
further PK and PD information is collected, as well as identification of possible adverse effects and safety risks and
preliminary evaluation of efficacy. Phase 3 clinical trials generally involve large numbers of patients at multiple sites, in
multiple countries (from several hundred to several thousand subjects) and are designed to provide the data necessary to
demonstrate the efficacy of the drug for its intended use, its safety in use, and to establish the overall benefit/risk
relationship of the drug and provide an adequate basis for drug approval. Phase 3 clinical trials may include comparisons
with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of
a drug during marketing. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for
approval of an NDA.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing
approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic
indication. In certain instances, FDA may mandate the performance of Phase 4 clinical trials.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and
written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse
reactions, any finding from other clinical studies, tests in laboratory animals, or in vitro testing that suggests a significant
risk for human subjects, or any clinically important increase in the rate 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, if at all. The FDA or the clinical trial sponsor may suspend or terminate a
clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed
to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if
the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated
with unexpected serious harm to patients. In addition, some clinical trials are overseen by an independent group of
qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This
group provides authorization for whether or not a trial may move forward at designated check points based on access to
certain data from the trial. We may also suspend or terminate a clinical trial based on evolving business objectives and/or
competitive climate. Concurrent with clinical trials, companies usually complete additional animal studies and must also
develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process
for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process
must be capable of consistently producing quality batches of the drug candidate and, among other things, cGMPs impose
extensive procedural, substantive and recordkeeping requirements to ensure and preserve the long term stability and
quality of the final drug product. In addition, appropriate packaging must be selected and tested and stability studies
must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
NDA and FDA Review Process
Following trial completion, trial data are analyzed to assess safety and efficacy. The results of pre-clinical
studies and clinical trials are then submitted to the FDA as part of an NDA, along with proposed labeling for the drug
and information about the manufacturing process and facilities that will be used to ensure drug quality, results of
analytical testing conducted on the chemistry of the drug, and other relevant information. The NDA is a request for
approval to market the drug and must contain adequate evidence of safety and efficacy, which is demonstrated by
extensive pre-clinical and clinical testing. The application includes both negative or ambiguous results of pre-clinical
studies and clinical trials as well as positive findings. Data may come from company-sponsored clinical trials intended to
test the safety and efficacy of a use of a drug, 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 investigational drug product to the satisfaction of the FDA. The submission of an NDA is
subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited
circumstances. FDA approval of an NDA must be obtained before a drug may be offered for sale in the United States.
In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain
data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and
to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA
may grant deferrals for submission of data or full or partial waivers.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA must be accompanied by a user
fee. The FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s fiscal year 2018 fee schedule,
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effective through September 30, 2018, the user fee for an application requiring clinical data, such as an NDA, is
$2,421,495. PDUFA also imposes an annual prescription drug product program fee for human drugs ($304,162). Fee
waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first
application filed by a small business. In addition, no user fees are assessed on NDAs for products designated as orphan
drugs, unless the product also includes a non-orphan indication.
The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information
rather than accepting an NDA for filing. The FDA must make a decision on accepting an NDA for filing within 60 days
of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals
and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its
initial review of a standard NDA and respond to the applicant, and six months from the filing date for a priority NDA.
The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often
significantly extended by FDA requests for additional information or clarification.
After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things,
whether the proposed drug is safe and effective for its intended use, and whether the drug is being manufactured in
accordance with cGMP to assure and preserve the drug’s identity, strength, quality and purity. The FDA may refer
applications for novel drugs or drug candidates that present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and 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 carefully when making decisions.
The FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and
us during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and
may take longer than originally planned to complete, and we may not receive a timely approval, if at all.
Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for
the new drug to determine whether they comply with cGMPs. The FDA will not approve the drug unless it determines
that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure
consistent production of the drug within required specifications. In addition, before approving an NDA, the FDA may
also audit data from clinical trials by inspecting the sponsor or clinical trial sites to ensure compliance with GCP
requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities where the
drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter. An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific
indications. A Complete Response Letter indicates that the review cycle of the application is complete and the
application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the
NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional
pivotal clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials,
pre-clinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the
NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and
information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data
obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the
same data.
There is no assurance that the FDA will ultimately approve a drug product for marketing in the United States
and we may encounter significant difficulties or costs during the review process. If a drug receives marketing approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be
limited, which could restrict the commercial value of the drug. Further, the FDA may require that certain
contraindications, warnings or precautions be included in the drug labeling or may condition the approval of the NDA on
other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to
conduct post-market testing or clinical trials and surveillance to monitor the effects of approved drugs. For example, the
FDA may require Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and
effectiveness and may require testing and surveillance programs to monitor the safety of approved drugs that have been
commercialized. The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation
and Mitigation Strategy, or REMS to assure the safe use of the drug. If the FDA concludes a REMS is needed, the
sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if
required. A REMS could include medication guides, physician communication plans, or elements to assure safe use,
such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on
approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of drugs. Drug
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approvals may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial
marketing.
Special FDA Expedited Review and Approval Programs
The FDA has various programs, including fast track designation, accelerated approval, priority review and
breakthrough therapy designation, that are intended to expedite or simplify the process for the development and FDA
review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate
the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to
patients earlier than under standard FDA review procedures. To be eligible for fast track designation, the FDA must
determine, based on the request of a sponsor, that a drug is intended to treat a serious or life threatening disease or
condition and based on pre-clinical or preliminary clinical data demonstrates the potential to address an unmet medical
need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none
exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors.
The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a
treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review an application
is six months, rather than the standard review of ten months under current PDUFA guidelines. These six and ten month
review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities,
which typically adds approximately two months to the timeline for review and decision from the date of submission.
Products that are eligible for fast track designation are also likely to be considered appropriate to receive a priority
review.
In addition, drugs 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 and may be
approved on the basis of adequate and well-controlled clinical trials establishing that the drug has an effect on a
surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured
earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or
mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the
availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug
receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on
irreversible morbidity or mortality or other clinical endpoint, and the drug may be subject to accelerated withdrawal
procedures.
Moreover, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A
breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat
a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also
eligible for accelerated approval and priority review. The FDA must take certain actions, such as holding timely
meetings and providing advice, intended to expedite the development and review of an application for approval of a
breakthrough therapy.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no
longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be
shortened. Furthermore, fast track designation, priority review, accelerated approval and breakthrough therapy
designation, do not change the standards for approval and may not ultimately expedite the development or approval
process.
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Pediatric Trials
A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient,
new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric
Study Plan, or PSP, within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA.
The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including
study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including
such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the
requirement to provide data from pediatric studies along with supporting information. Development program candidates
designated as orphan drugs are exempt from the above requirements. FDA and the sponsor must reach agreement on the
PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need
to be considered based on data collected from pre-clinical studies, early phase clinical trials, and/or other clinical
development programs.
Post-Marketing Requirements
Following approval of a new drug, a pharmaceutical company and the approved drug are subject to continuing
regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the
applicable regulatory authorities of adverse experiences with the drug, providing the regulatory authorities with updated
safety and efficacy information, drug sampling and distribution requirements, and complying with promotion and
advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on
promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as
“off-label use”) and requirements for promotional activities involving the internet. Although physicians may prescribe
legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses. Prescription
drug promotional materials must be submitted to the FDA in conjunction with their first use. There are also limitations
on industry-sponsored scientific and educational activities. Modifications or enhancements to the drug or its labeling or
changes of the site of manufacture are often subject to the approval of the FDA and other regulators, which may or may
not be received or may result in a lengthy review process. Any distribution of prescription drugs and pharmaceutical
samples must comply with the U.S. Prescription Drug Marketing Act, or the PDMA, a part of the FDCA.
In the United States, once a drug is approved, its manufacture is subject to comprehensive and continuing
regulation by the FDA. The FDA regulations require that drugs be manufactured in specific approved facilities and in
accordance with cGMP. We rely, and expect to continue to rely, on third parties for the production of clinical and
commercial quantities of our drugs in accordance with cGMP regulations. cGMP regulations require among other things,
quality control and quality assurance as well as the corresponding maintenance of records and documentation and the
obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the
manufacture and distribution of approved drugs 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 cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in
the area of production and quality control to maintain cGMP compliance. These regulations also impose certain
organizational, procedural and documentation requirements with respect to manufacturing and quality assurance
activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and
monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where
applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions,
including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such
facilities or the ability to distribute drugs manufactured, processed or tested by them. Discovery of problems with a drug
after approval may result in restrictions on a drug, manufacturer, or holder of an approved NDA, including, among other
things, recall or withdrawal of the drug from the market, and may require substantial resources to correct.
The FDA also may require post-approval testing, sometimes referred to as Phase 4 testing, risk minimization
action plans and post-marketing surveillance to monitor the effects of an approved drug or place conditions on an
approval that could restrict the distribution or use of the drug. Discovery of previously unknown problems with a drug or
the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity,
judicial or administrative enforcement, untitled or warning letters from the FDA, mandated corrective advertising or
communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or
effectiveness data may require changes to a drug’s approved labeling, including the addition of new warnings and
contraindications, and also may require the implementation of other risk management measures. The distribution of
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pharmaceutical drugs is subject to additional requirements and regulations, including extensive record-keeping,
licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical drugs.
Also, new government requirements, including those resulting from new legislation, may be established, or the
FDA’s policies may change, which could delay or prevent regulatory approval of our drugs under development.
Other Regulatory Matters
Manufacturing, sales, promotion and other activities following drug approval are also subject to regulation by
numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare &
Medicaid Services, other divisions of the Department of Health and Human Services, the Drug Enforcement
Administration for controlled substances, the Consumer Product Safety Commission, the Federal Trade Commission, the
Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments. In
the United States, sales, marketing and scientific/educational programs must also comply with state and federal fraud
and abuse laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus
Budget Reconciliation Act of 1990 and more recent requirements in the Patient Protection and Affordable Care Act as
amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act. If
drugs are made available to authorized users of the Federal Supply Schedule of the General Services Administration,
additional laws and requirements apply. The handling of any controlled substances must comply with the U.S.
Controlled Substances Act and Controlled Substances Import and Export Act. Drugs must meet applicable child-resistant
packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other
activities are also potentially subject to federal and state consumer protection and unfair competition laws.
The failure to comply with regulatory requirements subjects firms to possible legal or regulatory action.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution,
fines or other penalties, injunctions, voluntary recalls, seizure of drugs, total or partial suspension of production, denial
or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government
contracts. In addition, even if a firm complies with FDA and other requirements, new information regarding the safety or
efficacy of a product could lead the FDA to modify or withdraw product approval. Prohibitions or restrictions on sales or
withdrawal of future products marketed by us could materially affect our business in an adverse way.
Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the
future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to
product labeling; (iii) the voluntary recall or discontinuation of our products; or (iv) additional record-keeping
requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of our drug candidates, some of our
U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments
permit a patent restoration term of up to five years as compensation for patent term lost during product development and
the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent
beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the
time between the effective date of an IND and the submission date of an NDA plus the time between the submission date
of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the
extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in
consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the
future, we intend to apply for restoration of patent term for one of our currently owned or licensed patents to add patent
life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved
in the filing of the relevant NDA.
Marketing exclusivity provisions under the FDCA can also delay the submission or the approval of certain
marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United
States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if
the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or
ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review
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an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another drug
based on the same active moiety, regardless of whether the drug is intended for the same indication as the original
innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the
data required for approval. However, an application may be submitted after four years if it contains a certification of
patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. The FDCA
also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical
investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the
FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing
drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the
new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the active agent
for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or
approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of
reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety
and effectiveness. Orphan drug exclusivity, as described below, may offer a seven-year period of marketing exclusivity,
except in certain circumstances. Pediatric exclusivity is another type of regulatory market exclusivity in the United
States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month
exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the
voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.
Orphan Drug Designation
The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects
fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States,
there is no reasonable expectation that the cost of developing and marketing the drug for this type of disease or condition
will be recovered from sales in the United States. In the European Union, the European Commission, after receiving the
opinion of the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote
the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or
chronically debilitating conditions affecting not more than five in 10,000 persons in the European Union Community. In
addition, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening,
seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug
in the European Union would be sufficient to justify the necessary investment in developing the drug or biological
product.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for
grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first
FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity,
which means the FDA may not approve any other application to market the same drug for the same indication for a
period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with
orphan exclusivity.
In the European Union, orphan drug designation also entitles a party to financial incentives such as reduction of
fees or fee waivers and ten years of market exclusivity is granted following drug or biological product approval. This
period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown
that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Orphan drug designation must be requested before submitting an application for marketing approval. Orphan
drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval
process.
Regulation of Diagnostic Tests
We expect that our drug candidates may require use of a diagnostic to identify appropriate patient populations
for our products. These diagnostics, often referred to as companion diagnostic tests, are medical devices, often in vitro
devices, which provide information that is essential for the safe and effective use of a corresponding drug. For example,
we have entered into agreements with third parties to develop and commercialize companion diagnostic tests for
avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC
patients with FGFR4 pathway activation and BLU-667 in order to identify NSCLC patients with RET fusions. In the
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United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern,
among other things, medical device design and development, pre-clinical and clinical testing, premarket clearance or
approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing
clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing
authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket
approval, or PMA approval. We expect that any companion diagnostic test developed for our drug candidates will utilize
the PMA pathway.
PMA applications must be supported by valid scientific evidence, which typically requires extensive data,
including technical, pre-clinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and
effectiveness of the device. For diagnostic tests, a PMA application typically includes data regarding analytical and
clinical validation studies. As part of its review of the PMA, the FDA will conduct a pre-approval inspection of the
manufacturing facility or facilities to ensure compliance with the Quality System Regulation, or QSR, which requires
manufacturers to follow design, testing, control, documentation and other quality assurance procedures. FDA review of
an initial PMA may require several years to complete. If the FDA evaluations of both the PMA application and the
manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually
contains a number of conditions that must be met in order to secure the final approval of the PMA. If the FDA’s
evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a
not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will
identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are
necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted
and then the data submitted in an amendment to the PMA. Once granted, PMA approval may be withdrawn by the FDA
if compliance with post approval requirements, conditions of approval or other regulatory standards is not maintained or
problems are identified following initial marketing.
On August 6, 2014, the FDA issued a final guidance document addressing the development and approval
process for “In Vitro Companion Diagnostic Devices.” According to the guidance, for novel drugs such as our drug
candidates, a companion diagnostic test device and its corresponding drug should be approved or cleared
contemporaneously by FDA for the use indicated in the therapeutic product labeling. The guidance also explains that a
companion diagnostic test device used to make treatment decisions in clinical trials of a drug generally will be
considered an investigational device, unless it is employed for an intended use for which the device is already approved
or cleared. If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be
considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. Thus, the
sponsor of the diagnostic device will be required to comply with the IDE regulations. According to the guidance, if a
diagnostic device and a drug are to be studied together to support their respective approvals, both products can be
studied in the same investigational study, if the study meets both the requirements of the IDE regulations and the IND
regulations. The guidance provides that depending on the details of the study plan and subjects, a sponsor may seek to
submit an IND alone, or both an IND and an IDE.
In the EEA, in vitro medical devices are required to conform with the essential requirements of the E.U.
Directive on in vitro diagnostic medical devices (Directive No 98/79/EC, as amended). To demonstrate compliance with
the essential requirements, the manufacturer must undergo a conformity assessment procedure. The conformity
assessment varies according to the type of medical device and its classification. For low-risk devices, the conformity
assessment can be carried out internally, but for higher risk devices it requires the intervention of an accredited EEA
Notified Body. If successful, the conformity assessment concludes with the drawing up by the manufacturer of an EC
Declaration of Conformity entitling the manufacturer to affix the CE mark to its products and to sell them throughout the
EEA.
European Drug Development
In the European Union, our future drugs may also be subject to extensive regulatory requirements. As in the
United States, medicinal products can only be marketed if a marketing authorization from the competent regulatory
agencies has been obtained.
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Similar to the United States, the various phases of pre-clinical and clinical research in the European Union are
subject to significant regulatory controls. Although the current EU Clinical Trials Directive 2001/20/EC, or Clinical
Trials Directive, has sought to harmonize the European Union clinical trials regulatory framework, setting out common
rules for the control and authorization of clinical trials in the European Union, the European Union Member States have
transposed and applied the provisions of the Directive differently. This has led to significant variations in the member
state regimes. Under the current regime, before a clinical trial can be initiated it must be approved in each of the
European Union countries where the trial is to be conducted by two distinct bodies: the National Competent Authority,
or NCA, and one or more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse
reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the
Member State where they occurred.
In April 2014, the European Union adopted a new Clinical Trials Regulation (EU) No 536/2014, or the Clinical
Trials Regulation, which is set to replace the Clinical Trials Directive. It is expected that the new Clinical Trials
Regulation will apply by October 2019. The Clinical Trials Regulation will overhaul the current system of approvals for
clinical trials in the European Union. Specifically, the new legislation, which will be directly applicable in all member
states, aims at simplifying and streamlining the approval of clinical trials in the European Union. For instance, the new
Clinical Trials Regulation provides for a streamlined application procedure via a single entry point and strictly defined
deadlines for the assessment of clinical trial applications.
European Drug Review and Approval
In the European Economic Area, or EEA, (which is comprised of the 28 Member States of the European Union
plus Norway, Iceland and Liechtenstein), medicinal products can only be commercialized after obtaining a Marketing
Authorization, or MA. There are two types of marketing authorizations:
The Community MA, which is issued by the European Commission through the Centralized Procedure, based
on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA and which is valid
throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of drugs, such as
biotechnology medicinal drugs, orphan medicinal drugs, and medicinal drugs containing a new active substance
indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The
Centralized Procedure is optional for drugs containing a new active substance not yet authorized in the EEA, or for drugs
that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in
the European Union.
National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover
their respective territory, are available for drugs not falling within the mandatory scope of the Centralized Procedure.
Where a drug has already been authorized for marketing in a Member State of the EEA, this National MA can be
recognized in another Member State through the Mutual Recognition Procedure. If the drug has not received a National
MA in any Member State at the time of application, it can be approved simultaneously in various Member States through
the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent
authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the
Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft
summary of the drug characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other
Member States (referred to as the Member States Concerned) for their approval. If the Member States Concerned raise
no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed
by the RMS, the drug is subsequently granted a national MA in all the Member States (i.e. in the RMS and the Member
States Concerned).
Under the above described procedures, before granting the MA, the EMA or the competent authorities of the
Member States of the EEA make an assessment of the risk-benefit balance of the drug on the basis of scientific criteria
concerning its quality, safety and efficacy.
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European Chemical Entity Exclusivity
In the European Union, new chemical entities, sometimes referred to as new active substances, qualify for eight
years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. This data
exclusivity, if granted, prevents regulatory authorities in the European Union from referencing the innovator’s data to
assess a generic application for eight years, after which generic marketing authorization can be submitted, and the
innovator’s data may be referenced, but not approved for two years. 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.
Rest of the World Regulation
For other countries outside of the European Union and the United States, such as countries in Eastern Europe,
Latin America or Asia, the requirements governing the conduct of clinical trials, drug licensing, pricing and
reimbursement vary from country to country. In all cases the clinical trials must be conducted in accordance with GCP
requirements and the applicable regulatory requirements and the ethical principles that have their origin in the
Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things,
fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and
criminal prosecution.
Coverage and Reimbursement
Sales of our drugs will depend, in part, on the extent to which our drugs will be covered by third-party payors,
such as government health programs, commercial insurance and managed healthcare organizations. These third-party
payors are increasingly reducing reimbursements for medical drugs and services. In addition, the containment of
healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this
effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing
cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of
generic drugs. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party
reimbursement for our drug candidates, if approved, or a decision by a third-party payor to not cover our drug candidates
could reduce physician usage of such drugs and have a material adverse effect on our sales, results of operations and
financial condition.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the
Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D,
Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of
outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription
drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug
formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug
formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not
necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be
developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of
prescription drugs may increase demand for drugs for which we receive marketing approval. However, any negotiated
prices for our drugs covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise
obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that
results from the MMA may result in a similar reduction in payments from non-governmental payors.
The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to
compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012
by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National
Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to
Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies
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for public or private payors, it is not clear what effect, if any, the research will have on the sales of our drug candidates,
if any such drug or the condition that they are intended to treat is the subject of a trial. It is also possible that comparative
effectiveness research demonstrating benefits in a competitor’s drug could adversely affect the sales of our drug
candidate. If third-party payors do not consider our drugs to be cost-effective compared to other available therapies, they
may not cover our drugs after approval as a benefit under their plans or, if they do, the level of payment may not be
sufficient to allow us to sell our drugs on a profitable basis.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation
Act of 2010, or collectively the Affordable Care Act, enacted in March 2010, has had a significant impact on the health
care industry. The Affordable Care Act expanded coverage for the uninsured while at the same time containing overall
healthcare costs. With regard to pharmaceutical products, the Affordable Care Act, among other things, 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, increased the minimum Medicaid rebates owed by
manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in
Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded
prescription drugs, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to
offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
In addition, other legislative changes have been proposed and adopted in the United States since the Affordable
Care Act was enacted. On August 2, 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 to
Medicare payments to providers of up to 2% per fiscal year, started in April 2013, and, due to subsequent legislative
amendments, will stay in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, then
President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which among other things,
also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers,
and increased the statute of limitations period for the government to recover overpayments to providers from three to
five years. We expect that additional 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 drugs and services, and in turn could
significantly reduce the projected value of certain development projects and reduce our profitability. In January 2017,
Congress voted to adopt a budget resolution for fiscal year 2017, that while not a law, is widely viewed as the first step
toward the passage of legislation that would repeal certain aspects of the Affordable Care Act. The 2017 Tax Cuts and
Jobs Act, or TJCA, includes a provision repealing the individual mandate, effective January 1, 2019. Further, on January
20, 2017, U.S. President Donald Trump signed an Executive Order directing federal agencies with authorities and
responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of
any provision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or
regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical
devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that
reimburse insurers under the Affordable Care Act. Several state Attorneys General filed suit to stop the administration
from terminating these subsidies, but on October 25, 2017, a federal judge in California denied their request for a
restraining order. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting
benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the health
benefits required under the Affordable Care Act for plans sold through these marketplaces. There may be further action
to repeal, replace or modify the Affordable Care Act. While any legislative and regulatory changes will likely take time
to develop, and may or may not have an impact on the regulatory regime to which we are subject, we cannot predict the
ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be
lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the
European Union provides options for its member states to restrict the range of medicinal drugs for which their national
health insurance systems provide reimbursement and to control the prices of medicinal drugs for human use. A member
state may approve a specific price for the medicinal drug or it may instead adopt a system of direct or indirect controls
on the profitability of the company placing the medicinal drug on the market. There can be no assurance that any country
that has price controls or reimbursement limitations for pharmaceutical drugs will allow favorable reimbursement and
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pricing arrangements for any of our drugs. Historically, drugs launched in the European Union do not follow price
structures of the United States and generally tend to be significantly lower.
Other Healthcare Laws
We may also be subject to healthcare regulation and enforcement by the federal government and the states and
foreign governments where we may market our product candidates, if approved. These laws include, without limitation,
state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician sunshine laws and
regulations.
The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully
offering, soliciting, receiving or paying remuneration, directly or indirectly, to induce either the referral of an individual,
for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal
healthcare programs such as the Medicare and Medicaid programs. The government has enforced the Anti-Kickback
Statute to reach large settlements with healthcare companies based on sham consulting and other financial arrangements
with physicians. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in
order to have committed a violation. In addition, the government may assert that a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the
federal False Claims Act. The majority of states also have anti-kickback laws, which establish similar prohibitions and in
some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.
In addition, the civil False Claims Act prohibits, among other things, knowingly presenting or causing the
presentation of a false, fictitious or fraudulent claim for payment to the U.S. government. Actions under the False Claims
Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the
government. Violations of the False Claims Act can result in very significant monetary penalties and treble damages.
The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its
investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in
connection with the promotion of products for unapproved uses and other sales and marketing practices. The government
has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual
criminal convictions under applicable criminal statutes. Given the significant size of actual and potential settlements, it is
expected that the government will continue to devote substantial resources to investigating healthcare providers’ and
manufacturers’ compliance with applicable fraud and abuse laws.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created new federal
criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a
scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully
embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare
offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false,
fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation.
There has also been a recent trend of increased federal and state regulation of payments made to physicians and
other healthcare providers. The Affordable Care Act, among other things, imposes new reporting requirements on drug
manufacturers for payments made by them to physicians and teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members. Failure to submit required information may result in
civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for
“knowing failures”), for all payments, transfers of value or ownership or investment interests that are not timely,
accurately and completely reported in an annual submission. Drug manufacturers are required to submit annual reports to
the Centers for Medicare & Medicaid Services, which publicly posts the data on its website. Certain states also mandate
implementation of compliance programs, impose restrictions on drug manufacturer marketing practices and/or require
the tracking and reporting of gifts, compensation and other remuneration to physicians.
We may also be subject to data privacy and security regulation by both the federal government and the states in
which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or
HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25,
2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health
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information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to
“business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or
transmit protected health information in connection with providing a service for or on behalf of a covered entity.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates
and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal
civil actions. In addition, we may be subject to state law equivalents of each of the above federal laws, such as anti-
kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including
commercial insurers, and state laws governing the privacy and security of health information in certain circumstances,
many of which differ from each other in significant ways, thus complicating compliance efforts.
Employees
As of February 15, 2018, we had 149 full-time employees, including 58 employees with M.D. or Ph.D. degrees.
Of these full-time employees, 55 employees are engaged in research and development activities, and 3 are engaged in
general and administrative activities. None of our employees are represented by a labor union or covered by a collective
bargaining agreement. We consider our relationship with our employees to be good.
Corporate Information
We were incorporated in the State of Delaware in October 2008 under the name ImmunoCo, Inc. In May 2010,
we changed our name to Hoyle Pharmaceuticals, Inc., and in June 2011, we changed our name again to Blueprint
Medicines Corporation. Our principal executive offices are located at 45 Sidney Street, Cambridge, Massachusetts
02139, and our telephone number is (617) 374-7580.
Information Available on the Internet
Our Internet website address is http://www.blueprintmedicines.com. The information contained on, or that can
be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10-K. We
have included our website address in this in this Annual Report on Form 10-K solely as an inactive textual reference. We
make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of
the Exchange Act. We make these reports available through the “Investors — SEC Filings” section of our website as
soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and
Exchange Commission, or SEC. We also make available, free of charge on our website, the reports filed with the SEC
by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as
reasonably practicable after copies of those filings are provided to us by those persons. You can find, copy and inspect
information we file at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington,
DC 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public
reference room. You can review our electronically filed reports and other information that we file with the SEC on the
SEC’s website at http://www.sec.gov.
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 ones 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
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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 Our Financial Position and Need for Additional Capital
We are a biopharmaceutical company with a limited operating history and have not generated any revenue from drug
sales. We have incurred significant operating losses since our inception and anticipate that we will incur continued
losses for the foreseeable future.
We are a biopharmaceutical company with a limited operating history on which investors can base an
investment decision. Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial
degree of risk. We commenced operations in April 2011. Our operations to date have been limited primarily to
organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential
drug candidates and undertaking pre-clinical studies and commencing Phase 1 clinical trials and preparing for additional
planned clinical trials for our most advanced drug candidates, avapritinib, BLU-554 and BLU-667.
We are currently evaluating avapritinib in an ongoing Phase 1 clinical trial for defined subsets of patients with
gastrointestinal stromal tumors, or GIST, avapritinib in an ongoing Phase 1 clinical trial for advanced systemic
mastocytosis, or SM, BLU-554 in an ongoing Phase 1 clinical trial in patients with advanced hepatocellular carcinoma,
or HCC, and BLU-667 in an ongoing Phase 1 clinical trial in patients with non-small cell lung cancer, or NSCLC,
medullary thyroid cancer, or MTC, and other advanced solid tumors.
In September 2015, the U.S. Food and Drug Administration, or FDA, granted orphan drug designation to
BLU-554 for the treatment of HCC, and in January 2016, the FDA granted orphan drug designation to avapritinib for the
treatment of GIST and mastocytosis. In October 2016, the FDA granted fast track designation to avapritinib for the
treatment of patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a
second tyrosine kinase inhibitor and for the treatment of patients with unresectable or metastatic GIST with the PDGFR(cid:302)
D842V mutation regardless of prior therapy. In addition, in June 2017, the FDA granted breakthrough therapy
designation to avapritinib for the treatment of patients with unresectable or metastatic GIST harboring the PDGFR(cid:302)
D842V mutation, and in July 2017, the European Medicines Agency granted orphan drug designation to avapritinib for
the treatment of GIST. We have never generated any revenue from drug sales. We have not obtained regulatory
approvals for any of our drug candidates.
We have not yet demonstrated our ability to successfully complete any clinical trials, including large-scale,
pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scale drug, or arrange for a third party to
do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it
takes many years to develop one new drug from the time it is discovered to when it is available for treating patients.
Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if
we had a longer operating history. We will need to transition from a company with a research focus to a company
capable of supporting commercial activities. We may not be successful in such a transition.
Since inception, we have focused substantially all of our efforts and financial resources on developing our
proprietary compound library, novel target discovery engine and initial drug candidates. To date, we have financed our
operations primarily through public offerings of our common stock, private placements of our convertible preferred
stock, collaborations and a debt financing. Through December 31, 2017, we have received an aggregate of $1.1 billion
from such transactions, including $887.4 million in aggregate gross proceeds from the sale of common stock in our
May 2015 initial public offering, or IPO, and December 2016, April 2017 and December 2017 follow-on public
offerings, $115.1 million in gross proceeds from the issuance of convertible preferred stock, $18.8 million of upfront and
milestone payments under our former collaboration with Alexion Pharma Holding, or Alexion, a $45.0 million upfront
payment under our existing collaboration with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., which we refer
to collectively as Roche, and $10.0 million in gross proceeds from the debt financing.
Since inception, we have incurred significant operating losses. Our net losses were $148.1 million,
$72.5 million and $52.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of
December 31, 2017, we had an accumulated deficit of $355.6 million. Substantially all of our operating losses have
resulted from costs incurred in connection with our research and development programs and from general and
administrative costs associated with our operations. We expect to continue to incur significant expenses and operating
losses over the next
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several years and for the foreseeable future. Our prior losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders’ deficit and working capital. We expect our research and
development expenses to significantly increase in connection with continuing our existing clinical trials and beginning
additional clinical trials. In addition, if we obtain marketing approval for our drug candidates, we will incur significant
sales, marketing and outsourced-manufacturing expenses. We have incurred and will continue to incur additional costs
associated with operating as a public company. As a result, we expect to continue to incur significant and increasing
operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing
pharmaceuticals, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual
basis. Our ability to become profitable depends upon our ability to generate revenue.
To date, we have not generated any revenue from our most advanced drug candidates, avapritinib, BLU-554
and BLU-667, and we do not expect to generate any revenue from the sale of drugs in the near future. We do not expect
to generate significant revenue unless and until we obtain marketing approval of, and begin to sell, avapritinib,
BLU-554, BLU-667 or one of our other drug candidates. Our ability to generate revenue depends on a number of factors,
including, but not limited to, our ability to:
•
•
•
•
•
initiate and successfully complete clinical trials that meet their clinical endpoints;
initiate and successfully complete all safety studies required to obtain U.S. and foreign marketing
approval for our drug candidates;
establish commercial manufacturing capabilities or make arrangements with third-party manufacturers
for clinical supply and commercial manufacturing;
commercialize our drug candidates, if approved, by developing a sales force or entering into additional
collaborations with third parties; and
achieve market acceptance of our drug candidates in the medical community and with third-party
payors.
We expect to incur significant sales and marketing costs as we prepare to commercialize our drug candidates.
Even if we initiate and successfully complete pivotal clinical trials of our drug candidates, and our drug candidates are
approved for commercial sale, and despite expending these costs, our drug candidates may not be commercially
successful. We may not achieve profitability soon after generating drug sales, if ever. If we are unable to generate drug
revenue, we will not become profitable and may be unable to continue operations without continued funding.
We may need to raise substantial additional funding. If we are unable to raise capital when needed, we would be
forced to delay, reduce or eliminate some of our drug development programs or commercialization efforts.
The development of pharmaceuticals is capital-intensive. We are currently advancing our most advanced drug
candidates, avapritinib, BLU-554 and BLU-667, through clinical development. We expect our expenses to increase in
connection with our ongoing activities, particularly as we continue the research and development of, initiate or continue
clinical trials of, and seek marketing approval for, our drug candidates. In addition, depending on the status of regulatory
approval or, if we obtain marketing approval for any of our drug candidates, we expect to incur significant
commercialization expenses related to drug sales, marketing, manufacturing and distribution to the extent that such sales,
marketing, manufacturing and distribution are not the responsibility of Roche or other collaborators. We may also need
to raise additional funds sooner if we choose to pursue additional indications or geographies for our drug candidates or
otherwise expand more rapidly than we presently anticipate. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive
terms, we would be forced to delay, reduce or eliminate certain of our research and development programs or future
commercialization efforts.
As of December 31, 2017, we had cash, cash equivalents and investments of $673.4 million. Based on our
current plans, we believe our existing cash, cash equivalents and investments, excluding any potential option fees and
milestone payments under our existing collaboration with Roche, will be sufficient to enable us to fund our operating
44
expenses and capital expenditure requirements into the middle of 2020. Our future capital requirements will depend on
and could increase significantly as a result of many factors, including:
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the scope, progress, results and costs of drug discovery, pre-clinical development, laboratory testing
and clinical trials for our drug candidates;
the costs of securing and producing drug substance and drug product material for use in pre-clinical
studies, clinical trials and for use as commercial supply;
the scope, prioritization and number of our research and development programs;
the success of our collaboration with Roche;
the success of our current or future collaborations for companion diagnostic tests, including our
companion diagnostic tests for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V
mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway activation and BLU-667 in
order to identify NSCLC patients with RET fusions;
the costs, timing and outcome of regulatory review of our drug candidates;
our ability to establish and maintain additional collaborations on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under our
collaboration agreement with Roche or any collaboration agreements that we may enter into in the
future;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs
under future collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other drug candidates and technologies; and
the costs of establishing or contracting for sales, marketing and distribution capabilities if we obtain
regulatory approvals to market our drug candidates.
Identifying potential drug candidates and conducting pre-clinical development and testing and clinical trials is a
time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary
data or results required to obtain marketing approval and achieve drug sales. In addition, our drug candidates, if
approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs
that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to
rely on additional financing to achieve our business objectives.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may
adversely affect our ability to develop and commercialize our drug candidates. Dislocations in the financial markets have
generally made equity and debt financing more difficult to obtain and may have a material adverse effect on our ability
to meet our fundraising needs. We cannot guarantee that future financing will be available in sufficient amounts or on
terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of
our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such
issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities
would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations
and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional
debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that
could adversely impact our ability to conduct our business. We could also be required to seek funds through
arrangements with collaborators or otherwise at an earlier stage than otherwise would be desirable and we may be
45
required to relinquish rights to some of our technologies or drug candidates or otherwise agree to terms unfavorable to
us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or
discontinue one or more of our research or development programs or the commercialization of any drug candidate or be
unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially
affect our business, financial condition and results of operations.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish
rights to our technologies or drug candidates.
Until such time, if ever, as we can generate substantial drug revenues, we expect to finance our cash needs
through a combination of public and private equity offerings, debt financings, collaborations, strategic alliances and
licensing arrangements. We do not have any committed external source of funds, other than our collaboration with
Roche, which is limited in scope and duration, and funds already borrowed under the loan and security agreement that
we entered into with Silicon Valley Bank in May 2013. To the extent that we raise additional capital through the sale of
common stock or securities convertible or exchangeable into common stock, the ownership interest of our stockholders
will be diluted, and the terms of these securities may include liquidation or other preferences that materially adversely
affect the rights of our common stockholders. Debt financing, if available, would increase our fixed payment obligations
and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs
or drug candidates or to 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, we may be required to delay, limit, reduce or terminate our drug
development or future commercialization efforts or grant rights to develop and market drug candidates that we would
otherwise prefer to develop and market ourselves.
Risks Related to Drug Development and Regulatory Approval
We are very early in our development efforts with only three drug candidates, avapritinib, BLU-554 and BLU-667, in
clinical development. All of our other drug candidates are currently in pre-clinical or earlier stages of development. If
we are unable to advance our other drug candidates to clinical development, obtain regulatory approval for our most
advanced drug candidates or other drug candidates and ultimately commercialize our most advanced drug candidates
or other drug candidates, or experience significant delays in doing so, our business will be materially harmed.
We are very early in our development efforts with only three drug candidates, avapritinib, BLU-554 and
BLU-667, in clinical development. All of our other drug candidates are currently in pre-clinical or earlier stages of
development. We have invested substantially all of our efforts and financial resources in the identification and pre-
clinical development of kinase inhibitors, including the development of our drug candidates avapritinib, BLU-554 and
BLU-667. Our ability to generate drug revenues, which we do not expect will occur for many years, if ever, will depend
heavily on the successful development and eventual commercialization of our drug candidates, which may never occur.
We currently generate no revenues from sales of any drugs, and we may never be able to develop or commercialize a
marketable drug. Each of our drug candidates will require additional pre-clinical or clinical development, management
of clinical, pre-clinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining
manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts
before we generate any revenues from drug sales. In addition, for some of our drug candidates, in order to select patients
most likely to respond to treatment and rapidly confirm mechanistic and clinical proof-of-concept, we may seek to
develop companion diagnostic tests, which are assays or tests to identify an appropriate patient population. For example,
we have entered into agreements with third parties to develop and commercialize companion diagnostics for avapritinib
in order to identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with
FGFR4 pathway activation and BLU-667 in order to identify NSCLC patients with RET fusions. Companion diagnostic
tests are subject to regulation as medical devices and must themselves be approved for marketing by the FDA or certain
46
other foreign regulatory agencies before we may commercialize our drug candidates. The success of our most advanced
drug candidates and other drug candidates will depend on several factors, including the following:
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successful enrollment in, and completion of, clinical trials, including our current Phase 1 clinical trials
for avapritinib, BLU-554 and BLU-667;
successful completion of pre-clinical studies for our other drug candidates;
approval of Investigational New Drug applications for future clinical trials for our other drug
candidates;
successful development of any companion diagnostic tests for use with our drug candidates, including
the development of a companion diagnostic test for avapritinib in order to identify GIST patients with
the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway
activation and BLU-667 in order to identify NSCLC patients with RET fusions;
receipt of regulatory approvals from applicable regulatory authorities;
establishing commercial manufacturing capabilities or making arrangements with third-party
manufacturers for clinical supply and commercial manufacturing;
obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our drug
candidates;
launching commercial sales of our drug candidates, if and when approved, whether alone or in
collaboration with others;
acceptance of the drug candidates, if and when approved, by patients, the medical community and
third-party payors;
effectively competing with other therapies;
obtaining and maintaining healthcare coverage and adequate reimbursement;
enforcing and defending intellectual property rights and claims; and
• maintaining a continued acceptable safety profile of the drug candidates following approval.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant
delays or an inability to successfully commercialize our drug candidates, which would materially harm our business. If
we do not receive regulatory approvals for our drug candidates, we may not be able to continue our operations.
Our approach to the discovery and development of drug candidates that inhibit kinases is unproven, and we do not
know whether we will be able to develop any drugs of commercial value.
Our scientific approach focuses on using our novel target discovery engine and our proprietary compound
library to identify new kinase targets in disease indications. Our focus on using our novel target discovery engine to
identify potential kinase targets in disease indications may not result in the discovery and development of commercially
viable drugs for these diseases. The use of our proprietary compound library may not lead to the development of
commercially viable drugs. Even if we are able to develop a drug candidate that successfully targets these kinases in pre-
clinical studies, we may not succeed in demonstrating safety and efficacy of the drug candidate in clinical trials.
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Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur
additional costs or experience delays in completing, or ultimately be unable to complete, the development and
commercialization of our drug candidates.
Our drug candidates avapritinib, BLU-554 and BLU-667 are in clinical development, and all of our other drug
candidates, including BLU-782, are in pre-clinical development. The risk of failure for our drug candidates is high. It is
impossible to predict when or if any of our drug candidates will prove effective and safe in humans or will receive
regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any drug candidate,
we must complete pre-clinical studies and then conduct extensive clinical trials to demonstrate the safety and efficacy of
our drug candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to
complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The
outcome of pre-clinical development testing and early clinical trials may not be predictive of the success of later clinical
trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-clinical and clinical data
are often susceptible to varying interpretations and analyses, and many companies that have believed their drug
candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing
approval of their drug candidates. Our pre-clinical studies, current Phase 1 clinical trials and future clinical trials may not
be successful.
We are currently evaluating avapritinib in an ongoing Phase 1 clinical trial for patients with PDGFR(cid:302)-driven
GIST and KIT-driven GIST, avapritinib in an ongoing Phase 1 clinical trial for advanced SM, BLU-554 in an ongoing
Phase 1 clinical trial in patients with advanced HCC and BLU-667 in an ongoing Phase 1 clinical trial in patients with
RET-altered NSCLC, MTC and other advanced solid tumors. In addition, we plan to initiate a global, randomized Phase
3 clinical trial for avapritinib compared to regorafenib in third line GIST in the first half of 2018, a registration-enabling
Phase 2 clinical trial of avapritinib in patients with advanced SM in the first half of 2018 and a Phase 2 dose escalation
and proof-of-concept clinical trial of avapritinib in patients with indolent SM and smoldering SM in the second half of
2018.
Successful completion of our clinical trials is a prerequisite to submitting a new drug application, or NDA, to
the FDA and a Marketing Authorization Application, or MAA, in the European Union for each drug candidate and,
consequently, the ultimate approval and commercial marketing of avapritinib, BLU-554, BLU-667 and our other drug
candidates. We do not know whether any of our clinical trials for our drug candidates will be completed on schedule, if
at all.
We may experience delays in completing our pre-clinical studies and initiating or completing clinical trials, and
we may experience numerous unforeseen events during, or as a result of, any current or future clinical trials that we
could conduct that could delay or prevent our ability to receive marketing approval or commercialize our drug
candidates, including:
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regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our
investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
• we may experience delays in reaching, or fail to reach, agreement on acceptable terms with
prospective trial sites and prospective contract research organizations, or CROs, the terms of which
can be subject to extensive negotiation and may vary significantly among different CROs and trial
sites;
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clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide,
or regulators may require us, to conduct additional pre-clinical studies or clinical trials or we may
decide to abandon drug development programs;
the number of patients required for clinical trials of our drug candidates may be larger than we
anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop
out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we
anticipate;
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•
our third-party contractors may fail to comply with regulatory requirements or meet their contractual
obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop
out of the trial, which may require that we add new clinical trial sites or investigators;
• we may elect to, or regulators or IRBs or ethics committees may require that we or our investigators
suspend or terminate clinical research for various reasons, including noncompliance with regulatory
requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of our drug candidates may be greater than we anticipate;
the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of
our drug candidates may be insufficient or inadequate;
our drug candidates may have undesirable side effects or other unexpected characteristics, causing us
or our investigators, regulators or IRBs or ethics committees to suspend or terminate the trials, or
reports may arise from pre-clinical or clinical testing of other cancer therapies that raise safety or
efficacy concerns about our drug candidates; and
the FDA or other regulatory authorities may require us to submit additional data or impose other
requirements before permitting us to initiate a clinical trial.
We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in
which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or
other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors,
including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using
a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical
trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of our drug candidates. Further, the FDA may disagree with our
clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even
after it has reviewed and commented on the design for our clinical trials.
If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that
we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing,
if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for our drug candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
be subject to post-marketing testing requirements; or
have the drug removed from the market after obtaining marketing approval.
Our drug development costs will also increase if we experience delays in testing or regulatory approvals. We do
not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on
schedule, or at all. Significant pre-clinical study or clinical trial delays also could shorten any periods during which we
may have the exclusive right to commercialize our drug candidates or allow our competitors to bring products to market
before we do and impair our ability to successfully commercialize our drug candidates and may harm our business and
results of operations. Any delays in our pre-clinical or future clinical development programs may harm our business,
financial condition and prospects significantly.
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We may choose not to develop a potential drug candidate, or we may suspend, deprioritize or terminate one or more
discovery programs or pre-clinical drug candidates or programs.
At any time and for any reason, we may determine that one or more of our discovery programs or pre-clinical
drug candidates or programs does not have sufficient potential to warrant the allocation of resources toward such
program or drug candidate. Accordingly, we may choose not to develop a potential drug candidate or elect to suspend,
deprioritize or terminate one or more of our discovery programs or pre-clinical drug candidates or programs. For
example, we have previously determined to suspend our discovery program for inhibitors of neurotrophic tyrosine
receptor kinase, or NTRK, and predicted NTRK resistant mutants, and to deprioritize our discovery program targeting
protein kinase cAMP-activated catalytic subunit alpha fusions for the treatment of fibrolamellar carcinoma. If we
suspend, deprioritize or terminate a program or drug candidate in which we have invested significant resources, we will
have expended resources on a program that will not provide a full return on our investment and may have missed the
opportunity to have allocated those resources to potentially more productive uses, including existing or future programs
or drug candidates.
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 may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and
enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory
authorities outside the United States. In particular, because we are focused on diseases in genomically defined patient
populations, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.
In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as
our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical
trials of our competitors’ drug candidates.
Patient enrollment may be affected by other factors including:
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the severity of the disease under investigation;
the size of the target patient population;
the eligibility criteria for the clinical trial;
the availability of an appropriate genomic screening test;
the perceived risks and benefits of the drug candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment; and
the proximity and availability of clinical trial sites for prospective patients.
Because the target patient populations for our drug candidates are relatively small, it may be difficult to successfully
identify patients, could delay enrollment for our trials. If the market opportunities for our drug candidates are
smaller than we believe they are, our product revenues may be adversely affected and our business may suffer.
We focus our research and product development on treatments for cancer and rare genetic diseases, including
genomically defined cancer and diseases driven by abnormal kinase activation. Because the target patient populations for
our drug candidates are relatively small, it may be difficult to successfully identify patients. We have entered into
agreements with third parties to develop a companion diagnostic test for avapritinib in order to identify GIST patients
with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway activation and
BLU-667 in order to identify NSCLC patients with RET fusions. We may engage third parties to develop companion
50
diagnostic tests for use in some of our other current or future clinical trials. However, third parties may not be successful
in developing such companion diagnostic tests, furthering the difficulty in identifying patients for our clinical trials.
Our inability to enroll a sufficient number of patients in our clinical trials would result in significant delays and
could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in
increased development costs for our drug candidates, which would cause the value of our company to decline and limit
our ability to obtain additional financing. If we are unable to include patients with the driver of the disease, including the
applicable genomic alteration for diseases in genomically defined patient populations, this could compromise our ability
to seek participation in the FDA’s expedited review and approval programs, including breakthrough therapy designation
and fast track designation, or otherwise to seek to accelerate clinical development and regulatory timelines. In addition,
our projections of both the number of people who have these diseases, as well as the subset of people with these diseases
who have the potential to benefit from treatment with our drug candidates, are based on estimates. These estimates may
prove to be incorrect, and new studies may reduce the estimated incidence or prevalence of these diseases. The number
of patients in the United States, European Union and elsewhere may turn out to be lower than expected, may not be
otherwise amenable to treatment with our drug candidates or patients may become increasingly difficult to identify and
access, all of which would adversely affect our business, prospects and ability to achieve or sustain profitability.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals both for our drug
candidates and for any related companion diagnostic tests, we will not be able to commercialize, or will be delayed in
commercializing, our drug candidates, and our ability to generate revenue will be materially impaired.
Our drug candidates and any related companion diagnostic tests, including the companion diagnostic tests that
we are developing for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V mutation, BLU-554 in
order to identify HCC patients with FGFR4 pathway activation and BLU-667 in order to identify NSCLC patients with
RET fusions, and the activities associated with their development and commercialization, including their design, testing,
manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution,
import and export, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United
States and by comparable authorities in other countries. Before we can commercialize any of our drug candidates, we
must obtain marketing approval. We may also need marketing approval for any related companion diagnostic tests,
including the companion diagnostic tests that we are developing for avapritinib, BLU-554 and BLU-667. We have not
received approval to market any of our drug candidates or related companion diagnostic tests from regulatory authorities
in any jurisdiction, and it is possible that none of our current or future drug candidates or related companion diagnostic
tests will ever obtain regulatory approval. We have only limited experience in filing and supporting the applications
necessary to gain regulatory approvals and expect to rely on third-party CROs and/or regulatory consultants to assist us
in this process. Securing regulatory approval requires the submission of extensive pre-clinical and clinical data and
supporting information to the various regulatory authorities for each therapeutic indication to establish the drug
candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the drug
manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our drug
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 process of obtaining regulatory approvals, if approval is obtained at all, both in the United States and
abroad is expensive, may take many years if additional clinical trials are required and can vary substantially based upon
a variety of factors, including the type, complexity and novelty of the drug 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 NDA for a drug candidate, Pre-Market Approval, or PMA, application
for a companion diagnostic test or equivalent application types, may cause delays in the approval or rejection of an
application. The FDA and comparable authorities in other countries have substantial discretion in the approval process
and may refuse to accept any application or may decide that our data are insufficient for approval and require additional
pre-clinical, clinical or other studies. Our drug candidates could be delayed in receiving, or fail to receive, regulatory
approval for many reasons, including the following:
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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation
of our clinical trials;
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• we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory
authorities that a drug candidate is safe and effective for its proposed indication or a related companion
diagnostic test is suitable to identify appropriate patient populations;
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the results of clinical trials may not meet the level of statistical significance required by the FDA or
comparable foreign regulatory authorities for approval;
• we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety
risks;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data
from pre-clinical studies or clinical trials;
the data collected from clinical trials of our drug candidates may not be sufficient to support the
submission of an NDA or other submission or to obtain regulatory approval in the United States or
elsewhere;
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes
or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may
significantly change in a manner rendering our clinical data insufficient for approval.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our drug candidates
for fewer or more limited indications than we request, may not approve the price we intend to charge for our drugs and
related companion diagnostic tests, may grant approval contingent on the performance of costly post-marketing clinical
trials, or may approve a drug candidate with a label that does not include the labeling claims necessary or desirable for
the successful commercialization of that drug candidate. Any of the foregoing scenarios could materially harm the
commercial prospects for our drug candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our drug candidates and related
companion diagnostic tests, the commercial prospects for our drug candidates may be harmed and our ability to generate
revenues will be materially impaired.
Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit
the commercial profile of an approved label, or result in significant negative consequences following marketing
approval, if any.
Undesirable side effects caused by our drug candidates could cause us to interrupt, delay or halt pre-clinical
studies or could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more
restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities. As is the case
with all oncology drugs, it is likely that there may be side effects associated with the use of our drug candidates. Results
of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event,
our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to
cease further development of or deny approval of our drug candidates for any or all targeted indications. The
drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result
in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects
significantly.
Further, our drug candidates could cause undesirable side effects in clinical trials related to on-target toxicity.
For example, the FGF19/FGFR4 signaling axis has been shown to play a role in the regulation of de novo bile acid
synthesis. Modulation of this signaling axis by treatment with a small molecule FGFR4 inhibitor could lead to the
clinical symptoms that were observed with administration of an FGF19 antibody. If on-target toxicity is observed, or if
our drug candidates have characteristics that are unexpected, we may need to abandon their development or limit
development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less
52
prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise
in early stage testing for treating cancer have later been found to cause side effects that prevented further development of
the compound.
Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number
of patients and limited duration of exposure, rare and severe side effects of our drug candidates may only be uncovered
with a significantly larger number of patients exposed to the drug candidate. If our drug candidates receive marketing
approval and we or others identify undesirable side effects caused by such drug candidates (or any other similar drugs)
after such approval, a number of potentially significant negative consequences could result, including:
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•
regulatory authorities may withdraw or limit their approval of such drug candidates;
regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a
contraindication;
• we may be required to create a medication guide outlining the risks of such side effects for distribution
to patients;
• we may be required to change the way such drug candidates are distributed or administered, conduct
additional clinical trials or change the labeling of the drug candidates;
•
regulatory authorities may require a Risk Evaluation and Mitigation Strategy, or REMS, plan to
mitigate risks, which could include medication guides, physician communication plans, or elements to
assure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools;
• we may be subject to regulatory investigations and government enforcement actions;
• we may decide to remove such drug candidates from the marketplace;
• we could be sued and held liable for injury caused to individuals exposed to or taking our drug
candidates; and
•
our reputation may suffer.
We believe that any of these events could prevent us from achieving or maintaining market acceptance of the
affected drug candidates and could substantially increase the costs of commercializing our drug candidates, if approved,
and significantly impact our ability to successfully commercialize our drug candidates and generate revenues.
A breakthrough therapy designation by the FDA for our drug candidates, including avapritinib for the treatment of
patients with unresectable or metastatic GIST harboring the PDGFR(cid:302) D842V mutation, may not lead to a faster
development or regulatory review or approval process, and it does not increase the likelihood that our drug
candidates will receive marketing approval.
In June 2017, the FDA granted breakthrough therapy designation to avapritinib for the treatment of patients
with unresectable or metastatic GIST harboring the PDGFR(cid:302) D842V mutation. We may also seek breakthrough therapy
designation for some of our other drug candidates. A breakthrough therapy is defined as a drug that is intended, alone or
in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary
clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For
drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the
sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of
patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible
for accelerated approval.
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Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one
of our drug candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead
determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug
candidate may not result in a faster development process, review or approval compared to drugs considered for approval
under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more
of our drug candidates qualify as breakthrough therapies, the FDA may later decide that the drugs no longer meet the
conditions for qualification.
A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval
process.
In October 2016, the FDA granted fast track designation to avapritinib for the treatment of patients with
unresectable or metastatic GIST that progressed following treatment with imatinib and a second tyrosine kinase inhibitor
and for the treatment of patients with unresectable or metastatic GIST with the PDGFR(cid:302) D842V mutation regardless of
prior therapy. We may also seek fast track designation for some of our other drug candidates. If a drug is intended for the
treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical
needs for this condition, the drug sponsor may apply for fast track designation. The FDA has broad discretion whether or
not to grant this designation, so even if we believe a particular drug candidate is eligible for this designation, we cannot
assure you that the FDA would decide to grant it. Even though we have received fast track designation for avapritinib for
treatment of patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a
second tyrosine kinase inhibitor and for the treatment of patients with unresectable or metastatic GIST with the PDGFR(cid:302)
D842V mutation regardless of prior therapy, or even if we receive fast track designation for our other drug candidates,
we may not experience a faster development process, review or approval 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.
While we have received orphan drug designation for two of our most advanced drug candidates, avapritinib and
BLU-554, for specified indications, we may seek orphan drug designation for some of our other drug candidates.
However, we may be unsuccessful in obtaining or may be unable to maintain the benefits associated with orphan
drug designation, including the potential for market exclusivity.
In September 2015, the FDA granted orphan drug designation to BLU-554 for the treatment of HCC, and in
January 2016, the FDA granted orphan drug designation to avapritinib for the treatment of GIST and mastocytosis. In
addition, in July 2017, the European Medicines Agency granted orphan drug designation to avapritinib for the treatment
of GIST. As part of our business strategy, we may seek orphan drug designation for some of our other drug candidates,
and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the United States and the European
Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the
FDA may designate a drug as an orphan drug if it is a drug 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, or a patient
population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing
the drug will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party
to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee
waivers.
Similarly, in the European Union, the European Commission grants orphan drug designation after receiving the
opinion of the European Medicines Agency’s, or EMA, Committee for Orphan Medicinal Products on an orphan drug
designation application. Orphan drug designation is intended to promote the development of drugs that are intended for
the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than 5
in 10,000 persons in the European Union and for which no satisfactory method of diagnosis, prevention, or treatment has
been authorized (or the product would be a significant benefit to those affected). In addition, designation is granted for
drugs intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and
chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be
sufficient to justify the necessary investment in developing the drug. In the European Union, orphan drug designation
entitles a party to financial incentives such as reduction of fees or fee waivers.
Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the
indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the
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EMA or the FDA from approving another marketing application for the same drug and indication for that time period,
except in limited circumstances. The applicable period is seven years in the United States and ten years in the European
Union. The European Union exclusivity period can be reduced to six years if a drug no longer meets the criteria for
orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
Even if we obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the designated
drug from competition because different drugs can be approved for the same condition. Even after an orphan drug is
approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later
drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In
addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than
the indication for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the United
States may be lost if the FDA later determines that the request for designation was materially defective or if the
manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or
condition. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives
the drug any advantage in the regulatory review or approval process. While we intend to seek orphan drug designation
for our other drug candidates in addition to BLU-554 for the treatment of HCC and avapritinib for the treatment of GIST
and mastocytosis, we may never receive such designations. Even if we receive orphan drug designation for any of our
drug candidates, there is no guarantee that we will enjoy the benefits of those designations.
Even if we receive regulatory approval for any of our drug candidates, we will be subject to ongoing obligations and
continued regulatory review, which may result in significant additional expense. In addition, our drug candidates, if
approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to
penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our drugs.
If the FDA or a comparable foreign regulatory authority approves any of our drug candidates, the
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and
recordkeeping for the drug will be subject to extensive and ongoing regulatory requirements. These requirements include
submissions of safety and other post-marketing information and reports, registration, as well as continued compliance
with current Good Manufacturing Practices, or cGMPs, and Good Clinical Practices, or GCPs, for any clinical trials that
we conduct post-approval. Any regulatory approvals that we receive for our drug candidates may also be subject to
limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or
contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to
monitor the safety and efficacy of the drug. Later discovery of previously unknown problems with a drug, including
adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may result in, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of the drug, withdrawal of the drug from the market, or
voluntary drug recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by
us, or suspension or revocation of marketing approvals;
drug seizure or detention, or refusal to permit the import or export of drugs; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our drug candidates. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects
and ability to achieve or sustain profitability.
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We may not be successful in our efforts to use and expand our discovery platform to build a pipeline of drug
candidates.
A key element of our strategy is to use our novel target discovery engine to identify kinases that are drivers of
diseases in genomically defined patient populations with high unmet medical need in order to build a pipeline of drug
candidates. Although our research and development efforts to date have resulted in a pipeline of drug candidates, we
may not be able to continue to identify novel kinase drivers and develop drug candidates. Even if we are successful in
continuing to build our pipeline, the potential drug candidates that we identify may not be suitable for clinical
development. For example, they may be shown to have harmful side effects or other characteristics that indicate that
they are unlikely to be drugs that will receive marketing approval and achieve market acceptance. If we do not
successfully develop and commercialize drug candidates based upon our approach, we will not be able to obtain drug
revenues in future periods, which likely would result in significant harm to our financial position and adversely affect
our stock price.
We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on
drug 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 drug
candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with
other drug candidates or for other indications that later prove to have greater commercial potential. Our resource
allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our
spending on current and future research and development programs and drug candidates for specific indications may not
yield any commercially viable drugs. If we do not accurately evaluate the commercial potential or target market for a
particular drug candidate, we may relinquish valuable rights to that drug 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 drug candidate.
Risks Related to Commercialization
The incidence and prevalence for target patient populations of our drug candidates have not been established with
precision. If the market opportunities for our drug candidates are smaller than we estimate or if any approval that we
obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will
be adversely affected, possibly materially.
The precise incidence and/or prevalence for SM, GIST, HCC, RET-driven NSCLC, RET-driven MTC and FOP
are unknown. Our projections of both the number of people who have these diseases, as well as the subset of people with
these diseases who have the potential to benefit from treatment with our drug candidates, are based on estimates. We
estimate that in the United States, France, Germany, Italy, Spain, the United Kingdom and Japan, or the Major Markets,
there are approximately: (i) 20,700 patients with SM, including 2,600 patients with advanced SM, 1,800 patients with
SSM and 16,300 patients with ISM; (ii) 500 patients with PDGFR(cid:302) D842V-driven GIST; (iii) 24,100 patients with
GIST, including approximately 19,300 patients with KIT-driven GIST; (iv) 28,100 first and second line patients with
FGFR4-activated HCC; (v) 10,200 patients with RET-driven NSCLC and approximately 780 patients with RET-driven
MTC; and (vi) 1,100 patients with FOP.
The total addressable market opportunity for avapritinib for the treatment of patients with GIST and SM,
BLU-554 for the treatment of patients with HCC, BLU-667 for the treatment of patients with RET-driven NSCLC and
RET-driven MTC or BLU-782 for the treatment of patients with FOP will ultimately depend upon, among other things,
the diagnosis criteria included in the final label for each of avapritinib, BLU-554, BLU-667 and BLU-782, if our drug
candidates are approved for sale for these indications, acceptance by the medical community and patient access, drug
pricing and reimbursement. The number of patients in the Major Markets and elsewhere, including the number of
addressable patients in those markets, may turn out to be lower than expected, patients may not be otherwise amenable to
treatment with our drugs, or new patients may become increasingly difficult to identify or gain access to, all of which
would adversely affect our results of operations and our business.
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We face substantial competition, which may result in others discovering, developing or commercializing drugs before
or more successfully than we do.
The development and commercialization of new drugs is highly competitive. We face competition with respect
to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to
develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that
currently market and sell drugs or are pursuing the development of therapies in the field of kinase inhibition for cancer
and other diseases. Some of these competitive drugs and therapies are based on scientific approaches that are the same as
or similar to our approach, and others are based on entirely different approaches. Potential competitors also include
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.
Specifically, there are a large number of companies developing or marketing treatments for cancer, including
many major pharmaceutical and biotechnology companies. If avapritinib receives marketing approval for advanced SM,
it will face competition from Novartis AG’s midostaurin, a multi-kinase inhibitor with KIT D816V inhibitory activity
that was approved in April 2017 by the FDA for the treatment of advanced SM. If avapritinib receives marketing
approval for third line advanced GIST, it will face competition from Bayer AG’s regorafenib, and if avapritinib receives
marketing approval for second line advanced GIST, it will face competition from Pfizer Inc.’s sunitinib. In addition, if
avapritinib receives marketing approval for advanced SM, GIST and/or for GIST patients with the PDGFR(cid:302) D842V
mutation, it may face competition from other drug candidates in development for these indications, including drug
candidates in development by AB Science S.A., ARIAD Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda
Pharmaceutical Company Limited, AROG Pharmaceuticals, Inc., Celldex Therapeutics, Inc., Deciphera
Pharmaceuticals, LLC and Plexxikon Inc., a wholly-owned subsidiary of Daiichi Sankyo Company, Limited. If
BLU-554 receives marketing approval for patients with FGFR4-activated HCC, it will face competition from Bristol-
Myers Squibb Company’s nivolumab, an immune checkpoint inhibitor, which was approved in September 2017 by the
FDA for the treatment of HCC, as well as sorafenib and regorafenib, multi-kinase inhibitors for the treatment of HCC. In
addition, BLU-554 may face competition from other drug candidates in development by Abbisko Therapeutics Co., Ltd,
AstraZeneca plc, Bayer AG, Celgene Corporation, Eisai Inc., H3 Biomedicine Inc., Incyte Corporation, Johnson &
Johnson, Novartis AG, Sanofi S.A., Taiho Pharmaceutical Co., Ltd., U3 Pharma GmbH, a wholly-owned subsidiary of
Daiichi Sankyo Company, Limited, and Xoma Ltd. If BLU-667 receives marketing approval for patients with RET-
driven cancers, it may face competition from other drug candidates in development, including drug candidates in
development by ARIAD Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited,
AstraZeneca plc, Eisai Inc., Exelixis, Inc., GlaxoSmithKline plc, Loxo Oncology, Inc., Mirati Therapeutics, Inc.,
Novartis AG, Pfizer Inc. and Roche.
Many of the companies against which we are competing or against which we may compete in the future have
significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved drugs 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. Smaller or early stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. 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 technologies
complementary to, or necessary for, our programs.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than
any drugs that we or our collaborators may develop. Our competitors also may obtain FDA or other regulatory approval
for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a
strong market position before we or our collaborators are able to enter the market. The key competitive factors affecting
the success of all of our drug candidates, if approved, are likely to be their efficacy, safety, convenience, price, the
effectiveness of any related companion diagnostic tests, the level of generic competition and the availability of
reimbursement from government and other third-party payors.
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Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization
of any drug candidates that we may develop.
We will face an inherent risk of product liability exposure related to the testing of our drug candidates in human
clinical trials and use of our drug candidates through compassionate use programs, and we will face an even greater risk
if we commercially sell any drug candidates that we may develop. If we cannot successfully defend ourselves against
claims that our drug candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
•
•
decreased demand for any drug candidates that we may develop;
injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
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•
•
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significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue; and
the inability to commercialize any drug candidates that we may develop.
Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that
we may incur. We anticipate that we will need to increase our insurance coverage when we begin later-stage clinical
trials and if we successfully commercialize any drug candidate. Insurance coverage is increasingly expensive. We may
not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may
arise.
If we or our collaborators are unable to successfully develop and commercialize companion diagnostic tests for our
drug candidates, or experience significant delays in doing so we may not realize the full commercial potential of our
drug candidates.
Because we are focused on precision medicine, in which predictive biomarkers will be used to identify the right
patients for our drug candidates, we believe that our success may depend, in part, on the development and
commercialization of companion diagnostic tests. There has been limited success to date industrywide in developing and
commercializing these types of companion diagnostic tests. To be successful, we need to address a number of scientific,
technical and logistical challenges. We have entered into agreements to develop and commercialize companion
diagnostic tests with third parties for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V mutation,
BLU-554 in order to identify HCC patients with FGFR4 pathway activation and BLU-667 in order to identify NSCLC
patients with RET fusions. However, we have not yet initiated commercialization of these companion diagnostic tests or
development and commercialization of companion diagnostic tests for any of our other programs. We have little
experience in the development and commercialization of companion diagnostic tests and may not be successful in
developing and commercializing appropriate companion diagnostic tests to pair with any of our drug candidates that
receive marketing approval. Companion diagnostic tests are subject to regulation by the FDA and similar regulatory
authorities outside the United States as medical devices and require separate regulatory approval prior to
commercialization. Given our limited experience in developing and commercializing companion diagnostic tests, we are
relying on third parties to design, manufacture, obtain regulatory approval for and commercialize the companion
diagnostic tests for avapritinib, BLU-554 and BLU-667, and we expect to rely in whole or in part on third parties to
design, manufacture, obtain regulatory approval for and commercialize any other companion diagnostic tests for our
drug candidates. We and our collaborators may encounter difficulties in developing and obtaining approval for the
companion diagnostic tests, including issues relating to selectivity/specificity, analytical validation, reproducibility, or
clinical validation. In addition, our collaborators for any companion diagnostic test that we may seek to develop:
• may not perform their respective obligations as expected or as required under our agreements with
them;
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• may not pursue commercialization of a companion diagnostic test even if it receives any required
regulatory approvals;
• may elect not to continue the development of a companion diagnostic test based on changes in their or
other third parties’ strategic focus or available funding, or external factors, such as an acquisition, that
divert resources or create competing priorities;
• may not commit sufficient resources to the marketing and distribution of a companion diagnostic test;
and
• may terminate their relationship with us.
Any delay or failure by us or our collaborators to develop or obtain regulatory approval of the companion
diagnostic tests could delay or prevent approval of our drug candidates. If we, or any third parties that we have engaged
or may in the future engage to assist us are unable to successfully develop and commercialize companion diagnostic tests
for our drug candidates, or experience delays in doing so:
•
•
the development of our drug candidates may be adversely affected if we are unable to appropriately
select patients for enrollment in our clinical trials;
our drug candidates may not receive marketing approval if safe and effective use of a therapeutic drug
candidate depends on an in vitro diagnostic; and
• we may not realize the full commercial potential of any drug candidates that receive marketing
approval if, among other reasons, we are unable to appropriately select patients who are likely to
benefit from treatment with our drugs.
As a result, our business would be harmed, possibly materially.
In addition, third party collaborators may encounter production difficulties that could constrain the supply of
the companion diagnostic tests, and both they and we may have difficulties gaining acceptance of the use of the
companion diagnostic tests in the clinical community. If such companion diagnostic tests fail to gain market acceptance,
it would have an adverse effect on our ability to derive revenues from sales of our drug candidates, if approved. In
addition, the diagnostic company with whom we contract may decide to discontinue selling or manufacturing the
companion diagnostic test that we anticipate using in connection with development and commercialization of our drug
candidates or our relationship with such diagnostic company may otherwise terminate. We may not be able to enter into
arrangements with another diagnostic company to obtain supplies of an alternative diagnostic test for use in connection
with the development and commercialization of our drug candidates or do so on commercially reasonable terms, which
could adversely affect and/or delay the development or commercialization of our drug candidates.
Even if we are able to commercialize any drug candidates, such drugs may become subject to unfavorable pricing
regulations or third-party coverage and reimbursement policies, which would harm our business.
The regulations that govern regulatory approvals, pricing and reimbursement for new drugs 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 approval is granted. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a
result, we might obtain marketing approval for a drug candidate in a particular country, but then be subject to price
regulations that delay our commercial launch of the drug candidate, possibly for lengthy time periods, and negatively
impact the revenues we are able to generate from the sale of the drug candidate in that country. Adverse pricing
limitations may hinder our ability to recoup our investment in one or more drug candidates, even if our drug candidates
obtain marketing approval.
Our ability to commercialize any drug candidates successfully also will depend in part on the extent to which
coverage and reimbursement for these drug candidates and related treatments will be available from government
authorities, private health insurers and other organizations. Government authorities and third-party payors, such as
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private health insurers and health maintenance organizations, decide which medications they will pay for and establish
reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement
for particular drugs. Increasingly, third-party payors are requiring that drug companies provide them with predetermined
discounts from list prices and are challenging the prices charged for drugs. We cannot be sure that coverage will be
available for any drug candidate that we commercialize and, if coverage is available, the level of reimbursement.
Reimbursement may impact the demand for, or the price of, any drug candidate for which we obtain marketing approval.
If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize
any drug candidate for which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be
more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the
United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a
rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement
levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent.
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based
on reimbursement levels already set for lower-cost drugs and may be incorporated into existing payments for other
services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare
programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries
where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage
policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage
and profitable payment rates from both government-funded and private payors for any approved drugs that we develop
could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize drugs
and our overall financial condition.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare
costs. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act, or the Affordable Care Act, was passed, which substantially changes the way health care
is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The
Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars,
addresses 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, increases the minimum Medicaid rebates
owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled
in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded
prescription drugs, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to
offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
In addition, other legislative changes have been proposed and adopted in the United States since the Affordable
Care Act was enacted. On August 2, 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 of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to
subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional
action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other
things, further reduced Medicare payments to several types of providers.
Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory
initiatives. For example, the Middle Class Tax Relief and Job Creation Act of 2012 required that the Centers for
Medicare & Medicaid Services, the agency responsible for administering the Medicare program, or CMS, reduce the
Medicare clinical laboratory fee schedule by 2% in 2013, which served as a base for 2014 and subsequent years. In
addition, effective January 1, 2014, CMS also began bundling the Medicare payments for certain laboratory tests ordered
while a patient received services in a hospital outpatient setting. 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
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will pay for healthcare products and services, which could result in reduced demand for our drug candidates or
companion diagnostic tests or additional pricing pressures.
U.S. President Donald Trump and his administration have indicated that enacting changes to or repealing and
replacing the Affordable Care Act is a legislative priority. While Congress has not passed repeal legislation to date, the
TJCA includes a provision repealing the individual mandate, effective January 1, 2019. Further, on January 20, 2017,
U.S. President Donald Trump signed an Executive Order directing federal agencies with authorities and responsibilities
under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of
the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on
individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.
On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that
reimburse insurers under the Affordable Care Act. Several state Attorneys General filed suit to stop the administration
from terminating these subsidies, but on October 25, 2017, a federal judge in California denied their request for a
restraining order. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting
benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the health
benefits required under the Affordable Care Act for plans sold through these marketplaces. There may be further action
to repeal, replace or modify the Affordable Care Act. It is unclear what impact any changes to the Affordable Care Act
will have on the availability of healthcare and containing or lowering the cost of healthcare. We plan to continue to
evaluate the effect that the Affordable Care Act and its possible repeal and replacement may have on our business.
Healthcare reforms stemming from the repeal of, and potential replacement for, the Affordable Care Act may
result in more rigorous coverage criteria and lower reimbursement among regulated third-party payors, and in additional
downward pressure on the prices that we receive for sales of our products, if approved. Any reduction in reimbursement
from Medicare or other government-funded federal programs, including the Veterans Health Administration, or state
healthcare programs could lead to a similar reduction in payments from private commercial payors. The implementation
of cost containment measures or other healthcare reforms may thus prevent us from being able to generate revenue or
attain profitability.
The delivery of healthcare in the European Union, including the establishment and operation of health services
and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and
policy. National governments and health service providers have different priorities and approaches to the delivery of
health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary
constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by
relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to
develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or
regulate post-approval activities and affect our ability to commercialize any products for which we obtain marketing
approval.
We are currently unable to predict what additional legislation or regulation, if any, relating to the health care
industry may be enacted in the future or what effect recently enacted federal legislation or any such additional legislation
or regulation would have on our business. The pendency or approval of such proposals or reforms could result in a
decrease in our stock price or limit our ability to raise capital or to enter into collaboration agreements for the further
development and potential commercialization of our products.
If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third
parties to sell and market our drug candidates, we may not be successful in commercializing our drug candidates if
and when they are approved, and we may not be able to generate any revenue.
We do not currently have a sales or marketing infrastructure and have limited experience in the sale, marketing
or distribution of drugs. To achieve commercial success for any approved drug candidate for which we retain sales and
marketing responsibilities, we must build our sales, marketing, managerial, and other non-technical capabilities or make
arrangements with third parties to perform these services. In the future, we may choose to build a focused sales and
marketing infrastructure to sell, or participate in sales activities with our collaborators for, some of our drug candidates if
and when they are approved.
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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 drug launch. If the commercial launch of a drug 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 drug candidates 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 drugs;
the lack of complementary drugs 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 drug
revenues or the profitability of these drug revenues to us are likely to be lower than if we were to market and sell any
drug candidates that we develop ourselves. In addition, we may not be successful in entering into arrangements with
third parties to sell and market our drug 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 drug candidates 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 our drug
candidates. Further, our business, results of operations, financial condition and prospects will be materially adversely
affected.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse
and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion
from government healthcare programs, contractual damages, reputational harm and diminished profits and future
earnings.
Although we do not currently have any drugs on the market, once we begin commercializing our drug
candidates, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the
federal government and the states and foreign governments in which we conduct our business. Healthcare providers,
physicians and third-party payors play a primary role in the recommendation and prescription of any drug candidates for
which we obtain marketing approval. Our future arrangements with third-party payors and customers 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 our drug candidates for which we obtain
marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the
following:
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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 either the referral of an individual for, or the purchase, order or recommendation of,
any good or service, for which payment may be made under federal and state healthcare programs such
as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation;
the federal False Claims Act imposes 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, to the federal government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government. In
addition,
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the government may assert that a claim including items and services resulting from a violation of the
federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims
Act;
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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 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 healthcare benefits, items or services; similar to the
federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute
or specific intent to violate it in order to have committed a violation;
the federal physician payment transparency requirements, sometimes referred to as the “Sunshine Act”
under the Affordable Care Act require manufacturers of drugs, devices, biologics and medical supplies
that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report
to the Department of Health and Human Services information related to physician payments and other
transfers of value and the ownership and investment interests of such physicians and their immediate
family members;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of
2009 and its implementing regulations, which also imposes obligations on certain covered entity
healthcare providers, health plans, and healthcare clearinghouses as well as their business associates
that perform certain services involving the use or disclosure of individually identifiable health
information, including mandatory contractual terms, with respect to safeguarding the privacy, security
and transmission of individually identifiable health information;
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federal consumer protection and unfair competition laws, which broadly regulate marketplace
activities and activities that potentially harm consumers; and
analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply
to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers; and 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 drug manufacturers to report information related to payments to physicians and other health
care providers or marketing expenditures, and state laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts.
Ensuring that our future business arrangements with third parties comply with applicable healthcare laws and
regulations could involve substantial costs. It is possible that governmental authorities will conclude that our business
practices do 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, including anticipated activities to be conducted by our sales
team, were to be 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, exclusion 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 providers or entities with whom we expect to do business is 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.
Our future growth may depend, in part, on our ability to penetrate foreign markets, where we would be subject to
additional regulatory burdens and other risks and uncertainties.
Our future profitability may depend, in part, on our ability to commercialize our drug candidates in foreign
markets for which we may rely on collaboration with third parties. We are not permitted to market or promote any of our
drug candidates before we receive regulatory approval from the applicable regulatory authority in that foreign market,
and we may never receive such regulatory approval for any of our drug candidates. To obtain separate regulatory
approval in many other countries we must comply with numerous and varying regulatory requirements of such countries
regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and
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distribution of our drug candidates, and we cannot predict success in these jurisdictions. If we obtain approval of our
drug candidates and ultimately commercialize our drug candidates in foreign markets, we would be subject to additional
risks and uncertainties, including:
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our customers’ ability to obtain reimbursement for our drug candidates in foreign markets;
our inability to directly control commercial activities because we are relying on third parties;
the burden of complying with complex and changing foreign regulatory, tax, accounting and legal
requirements;
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
import or export licensing requirements;
longer accounts receivable collection times;
longer lead times for shipping;
language barriers for technical training;
reduced protection of intellectual property rights in some foreign countries;
the existence of additional potentially relevant third-party intellectual property rights;
foreign currency exchange rate fluctuations; and
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
Foreign sales of our drug candidates could also be adversely affected by the imposition of governmental
controls, political and economic instability, trade restrictions and changes in tariffs.
Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues,
if any.
In some countries, particularly countries in the European Union, the pricing of prescription pharmaceuticals is
subject to governmental control. In these countries, pricing negotiations with governmental authorities can take
considerable time after the receipt of marketing approval for a drug. 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 drug candidate
to other available therapies. If reimbursement of our drugs is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our business could be materially harmed. In addition, in 2016, the United Kingdom
referendum on its membership in the European Union resulted in a majority of United Kingdom voters voting to exit the
European Union, often referred to as Brexit. Brexit has already and may continue to adversely affect European and/or
worldwide regulatory conditions. Brexit could lead to legal uncertainty and potentially divergent national laws and
regulations, including those related to the pricing of prescription pharmaceuticals, as the United Kingdom determines
which European Union laws to replicate or replace. If the United Kingdom were to significantly alter its regulations
affecting the pricing of prescription pharmaceuticals, we could face significant new costs. As a result, Brexit could
impair our ability to transact business in the European Union and the United Kingdom.
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
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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.
Risks Related to Our Dependence on Third Parties
We may seek to establish additional collaborations, and, if we are not able to establish them on commercially
reasonable terms, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our drug candidates will require
substantial additional cash to fund expenses. For some of our drug candidates, we may decide to collaborate with
additional pharmaceutical and biotechnology companies for the development and potential commercialization of those
drug candidates.
We face significant competition in seeking appropriate collaborators. 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.
Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar
regulatory authorities outside the United States, the potential market for the subject drug candidate, the costs and
complexities of manufacturing and delivering such drug candidate to patients, the potential of competing drugs, the
existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator
may also consider alternative drug candidates or technologies for similar indications that may be available to collaborate
on and whether such a collaboration could be more attractive than the one with us for our drug candidate. The terms of
any additional collaborations or other arrangements that we may establish may not be favorable to us.
We may also be restricted under our collaboration agreement with Roche from entering into future agreements
on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and
document. In addition, there have been a significant number of recent business combinations among large
pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms or at all. If we
are unable to do so, we may have to curtail the development of the drug candidate for which we are seeking to
collaborate, reduce or delay its development program or one or more of our other development programs, delay its
potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and
undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to
fund development or commercialization activities on our own, we may need to obtain additional capital, which may not
be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop
our drug candidates or bring them to market and generate drug revenue.
In addition, our collaboration with Roche, as well as any future collaborations that we enter into, may not be
successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our
collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will
apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical
development and commercialization matters can lead to delays in the development process or commercializing the
applicable drug candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be
difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or
biotechnology companies and other third parties often are terminated or allowed to expire by the other party. For
example, in the fourth quarter of 2017, Alexion terminated our collaboration related to fibrodysplasia ossificans
progressive for convenience following a strategic review by Alexion of its research and development portfolio. Any
termination or expiration of our collaboration agreement with Roche or any future collaboration agreement could
adversely affect us financially or harm our business reputation.
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We rely on third parties to conduct our clinical trials for our drug candidates. If these third parties do not
successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we
may not be able to obtain regulatory approval for or commercialize our drug candidates and our business could be
substantially harmed.
We do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical
investigators, CROs, contract laboratories and other third parties to conduct or otherwise support clinical trials for our
drug candidates. We rely heavily on these parties for execution of clinical trials for our drug candidates and control only
certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our clinical trials is
conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our
reliance on CROs will not relieve us of our regulatory responsibilities. For any violations of laws and regulations during
the conduct of our clinical trials, we could be subject to warning letters or enforcement action that may include civil
penalties up to and including criminal prosecution.
We and our CROs are required to comply with regulations, including GCPs, for conducting, monitoring,
recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and
accurate, and that the trial patients are adequately informed of the potential risks of participating in clinical trials and
their rights are protected. These regulations are enforced by the FDA, the Competent Authorities of the Member States
of the European Economic Area and comparable foreign regulatory authorities for any drugs in clinical development.
The FDA enforces GCP regulations through periodic inspections of clinical trial sponsors, principal investigators and
trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may
be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will
determine that our current or future clinical trials comply with GCPs. In addition, our clinical trials must be conducted
with drug candidates produced under cGMPs regulations. Our failure or the failure of our CROs to comply with these
regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also
subject us to enforcement action. We also are required to register ongoing clinical trials and post the results of completed
clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can
result in fines, adverse publicity and civil and criminal sanctions.
Although we intend to design the clinical trials for our drug candidates, CROs will conduct all of the clinical
trials. As a result, many important aspects of our development programs, including their conduct and timing, will be
outside of our direct control. Our reliance on third parties to conduct current or future clinical trials will also result in
less direct control over the management of data developed through clinical trials than would be the case if we were
relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to
mistakes as well as difficulties in coordinating activities. Outside parties may:
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have staffing difficulties;
fail to comply with contractual obligations;
experience regulatory compliance issues;
undergo changes in priorities or become financially distressed; or
form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical
trials and may subject us to unexpected cost increases that are beyond our control. If the CROs do not perform clinical
trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the
development, regulatory approval and commercialization of our drug candidates may be delayed, we may not be able to
obtain regulatory approval and commercialize our drug candidates, or our development program materially and
irreversibly harmed. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat,
extend the duration of, or increase the size of any clinical trials we conduct and this could significantly delay
commercialization and require significantly greater expenditures.
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If any of our relationships with these third-party CROs terminate, we may not be able to enter into
arrangements with alternative CROs. If CROs 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 due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any
clinical trials such CROs are associated with may be extended, delayed or terminated, and we may not be able to obtain
regulatory approval for or successfully commercialize our drug candidates. As a result, we believe that our financial
results and the commercial prospects for our drug candidates in the subject indication would be harmed, our costs could
increase and our ability to generate revenue could be delayed.
We contract with third parties for the manufacture of our drug candidates for pre-clinical development and clinical
trials, and we expect to continue to do so for commercialization. This reliance on third parties increases the risk that
we will not have sufficient quantities of our drug candidates or drugs or such quantities at an acceptable cost, which
could delay, prevent or impair our development or commercialization efforts.
We do not currently own or operate, nor do we have any plans to establish in the future, any manufacturing
facilities or personnel. We rely, and expect to continue to rely, on third parties for the manufacture of our drug
candidates for pre-clinical development and clinical testing, as well as for the commercial manufacture of our drugs if
any of our drug candidates receive marketing approval. This reliance on third parties increases the risk that we will not
have sufficient quantities of our drug candidates or drugs or such quantities at an acceptable cost or quality, which could
delay, prevent or impair our development or commercialization efforts.
The facilities used by our contract manufacturers to manufacture our drug candidates must be approved by the
FDA pursuant to inspections that will be conducted after we submit our marketing applications to the FDA. We do not
control the manufacturing process of, and will be completely dependent on, our contract manufacturers for compliance
with cGMPs in connection with the manufacture of our drug candidates. If our contract manufacturers cannot
successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA
or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In
addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these
facilities for the manufacture of our drug candidates or if it withdraws any such approval in the future, we may need to
find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory
approval for or market our drug candidates, if approved. Further, our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical
holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or
recalls of drug candidates or drugs, if approved, operating restrictions and criminal prosecutions, any of which could
significantly and adversely affect our business and supplies of our drug candidates.
We do not have any long-term supply agreements with our contract manufacturers, and we purchase our
required drug supply, including the drug product and drug substance used in our most advanced drug candidates, on a
purchase order basis. In addition, we may be unable to establish or maintain any agreements with third-party
manufacturers or to do so on acceptable terms. Even if we are able to establish and maintain agreements with third-party
manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-
how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or
inconvenient for us.
Our drug candidates and any drugs that we may develop may compete with other drug candidates and approved
drugs for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP
regulations and that might be capable of manufacturing for us.
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Any performance failure on the part of our existing or future manufacturers could delay clinical development or
marketing approval. We do not currently have arrangements in place for redundant supply for bulk drug substances. If
our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers.
Although we believe that there are several potential alternative manufacturers who could manufacture our drug
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 drug candidates or drugs
could result in significant delays or gaps in availability of such drug candidates or drugs and may adversely affect our
future profit margins and our ability to commercialize any drugs that receive marketing approval on a timely and
competitive basis.
The third parties upon whom we rely for the supply of the active pharmaceutical ingredient, or API, drug product and
drug substance used in our most advanced drug candidates are our sole source of supply, and the loss of any of these
suppliers could significantly harm our business.
The API, drug product and drug substance used in our most advanced drug candidates are currently supplied to
us from single-source suppliers. Our ability to successfully develop our drug candidates, supply our drug candidates for
clinical trials and to ultimately supply our commercial drugs in quantities sufficient to meet the market demand, depends
in part on our ability to obtain the API, drug product and drug substance for these drugs in accordance with regulatory
requirements and in sufficient quantities for clinical testing and commercialization. Although we have entered into
arrangements to establish redundant or second-source supply of some of the API, drug product or drug substance for our
most advanced drug candidates, if any of our suppliers ceases its operations for any reason or is unable or unwilling to
supply API, drug product or drug substance in sufficient quantities or on the timelines necessary to meet our needs, it
could significantly and adversely affect our business, the supply of our drug candidates and our financial condition.
For all of our drug candidates, we intend to identify and qualify additional manufacturers to provide such API,
drug product and drug substance prior to submission of an NDA to the FDA and/or an MAA to the EMA. We are not
certain, however, that our single-source suppliers will be able to meet our demand for their products, either because of
the nature of our agreements with those suppliers, our limited experience with those suppliers or our relative importance
as a customer to those suppliers. It may be difficult for us to assess their ability to timely meet our demand in the future
based on past performance. While our suppliers have generally met our demand for their products on a timely basis in
the past, they may subordinate our needs in the future to their other customers.
Establishing additional or replacement suppliers for the API, drug product and drug substance used in our drug
candidates, if required, may not be accomplished quickly. If we are able to find a replacement supplier, such replacement
supplier would need to be qualified and may require additional regulatory approval, which could result in further delay.
While we seek to maintain adequate inventory of the API, drug product and drug substance used in our drug candidates,
any interruption or delay in the supply of components or materials, or our inability to obtain such API, drug product and
drug substance from alternate sources at acceptable prices in a timely manner could impede, delay, limit or prevent our
development efforts, which could harm our business, results of operations, financial condition and prospects.
Risks Related to Intellectual Property
If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our
technology and drugs or if the scope of the patent protection obtained is not sufficiently broad, our competitors could
develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully
commercialize our technology and drugs may be impaired.
Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual
property protection in the United States and other countries for our lead drug candidate, avapritinib, as well as our other
most advanced drug candidates, BLU-554, BLU-667 and BLU-782, and our core technologies, including our novel
target discovery engine and our proprietary compound library and other know-how. We seek to protect our proprietary
and intellectual property position by, among other methods, filing patent applications in the United States and abroad
related to our proprietary technology, inventions and improvements that are important to the development and
implementation of our business. We also rely on trade secrets, know-how and continuing technological innovation to
develop and maintain our proprietary and intellectual property position.
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We own patents and patent applications that relate to avapritinib, BLU-554, BLU-667 and BLU-782 as
composition of matter. We also own applications relating to composition of matter for KIT inhibitors with multiple
compound families, composition of matter for FGFR4 inhibitors with multiple compound families, composition of
matter for inhibitors of RET, including predicted RET resistance mutations, with multiple compound families, and
composition of matter for inhibitors of ALK2, with multiple compound families, as well as methods of use for these
novel compounds. The issued patent directed to BLU-554 composition of matter has a statutory expiration date in 2034,
the issued patent directed to avapritinib composition of matter has a statutory expiration date in 2034.
As of February 15, 2018, we owned five issued U.S. patents, four pending U.S. non-provisional patent
applications, one pending U.S. provisional patent application, 36 foreign patent applications in a number of jurisdictions,
including Australia, Argentina, Brazil, Bolivia, Canada, China, the European Union, Hong Kong, Israel, India, Japan,
Lebanon, Mexico, New Zealand, Pakistan, Paraguay, Philippines, Russia, Singapore, South Africa, South Korea,
Taiwan, Uruguay and Venezuela, one pending Patent Cooperation Treaty, or PCT, patent application and two U.S.
provisional applications directed to our KIT program, including avapritinib. Any U.S. or ex-U.S. patents issuing from
the pending applications covering avapritinib will have a statutory expiration date of October 2034. Patent term
adjustments or patent term extensions could result in later expiration dates.
As of February 15, 2018, we owned five issued U.S. patents, three pending U.S. non-provisional patent
applications, one pending U.S. provisional patent application, three issued foreign patents and 41 pending foreign patent
applications in a number of jurisdictions, including Argentina, Australia, Bolivia, Brazil, Canada, China, Egypt, the
European Union, Hong Kong, Israel, India, Indonesia, Japan, South Korea, Lebanon, Mexico New Zealand, Pakistan,
Paraguay, Philippines, Russia, Singapore, South Africa, Taiwan, Thailand, Uruguay and Venezuela, and one pending
PCT patent application directed to our FGFR4 program, including BLU-554. Any U.S. or ex-U.S. patent issuing from
the pending applications covering BLU-554 will have a statutory expiration date of July 2033, December 2033, October
2034, September 2037 or April 2038. Patent term adjustments or patent term extensions could result in later expiration
dates.
As of February 15, 2018, we owned five pending U.S. non-provisional patent applications, four pending PCT
applications, six pending foreign patent applications filed in Argentina, Lebanon, Uruguay and Taiwan, and one pending
U.S. provisional patent applications directed to our RET program, which, if issued, will have statutory expiration dates
of 2036 or 2037. Patent term adjustments or patent term extensions could result in later expiration dates.
As of February 15, 2018, we owned one pending U.S. patent application, one pending U.S. provisional patent
application and one pending PCT international application directed to our ALK2 program, including BLU-782, which, if
issued, will have statutory expiration dates of April 2037 or October 2038.
The intellectual property portfolio directed to our platform includes patent applications directed to novel gene
fusions and the uses of these fusions for detecting and treating conditions implicated with these fusions. As of February
15, 2018, we owned ten pending U.S. patent applications and ten pending European Union patent applications directed
to this technology, which, if issued, will have statutory expiration dates ranging from 2034 to 2035.
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.
The degree of patent protection we require to successfully commercialize our drug candidates may be
unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any
competitive advantage. We cannot provide any assurances that any of our patents have, or that any of our pending patent
applications that mature into issued patents will include, claims with a scope sufficient to protect avapritinib, BLU-554,
BLU-667, BLU-782 or our other drug candidates. In addition, the laws of foreign countries may not protect our rights to
the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the
natural expiration of a patent is generally twenty years after it is filed. Various extensions may be available; however, the
life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing
and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after
such candidates are commercialized. As a result, our owned patent portfolio may not provide us with adequate and
continuing patent protection sufficient to exclude others from commercializing drugs similar or identical to our drug
candidates, including generic versions of such drugs.
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Other parties have developed technologies that may be related or competitive to our own, and such parties may
have filed or may file patent applications, or may have received or may receive patents, claiming inventions that may
overlap or conflict with those claimed in our own patent applications or issued patents, with respect to either the same
methods or formulations or the same subject matter, in either case, that we may rely upon to dominate our patent
position in the market. 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 know with certainty whether 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. As a result, the issuance, scope, validity, enforceability and commercial value of our
patent rights cannot be predicted with any certainty. For example, we are aware of U.S. patents owned by third parties
that have generic composition of matter and method of treatment claims that may cover BLU-554 or generic method of
treatment claims that may cover BLU-667. If the claims of any of these third-party patents are asserted against us, we do
not believe BLU-554, BLU-667 or our proposed activities related to such compounds would be found to infringe any
valid claim of these patents. While we may decide to initiate proceedings to challenge the validity of these patents in the
future, we may be unsuccessful, and courts or patent offices in the United States and abroad could uphold the validity of
any such patents. If we were to challenge the validity of any issued United States patent in court, we would need to
overcome a statutory presumption of validity that attaches to every United States patent. This means that in order to
prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims.
In addition, the patent prosecution process is expensive 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. Further, with respect
to some of the pending patent applications covering our drug candidates, prosecution has yet to commence. Patent
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, have been significantly narrowed by the time they issue, if at all. It is also
possible that we will fail to identify patentable aspects of our research and development output before it is too late to
obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and
prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties.
Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best
interests of our business.
Even if we acquire patent protection that we expect should enable us to maintain such competitive advantage,
third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being
narrowed, invalidated or held unenforceable. The issuance of a patent is not conclusive as to its inventorship, scope,
validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the
United States and abroad. For example, we may be subject to a third-party submission of prior art to the USPTO
challenging the priority of an invention claimed within one of our patents, which submissions may also be made prior to
a patent’s issuance, precluding the granting of any of our pending patent applications. We may become involved in
opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our
patent rights or the patent rights of others from whom we have obtained licenses to such rights. Competitors may claim
that they invented the inventions claimed in our issued patents or patent applications prior to us, or may file patent
applications before we do. Competitors may also claim that we are infringing on their patents and that we therefore
cannot practice our technology as claimed under our patents, if issued. Competitors may also contest our patents, if
issued, by showing the patent examiner that the invention was not original, was not novel or was obvious. In litigation, a
competitor could claim that our patents, if issued, are not valid for a number of reasons. If a court agrees, we would lose
our rights to those challenged patents.
In addition, we may in the future be subject to claims by our former employees or consultants asserting an
ownership right in our patents or patent applications, as a result of the work they performed on our behalf. Although we
generally require all of our employees, consultants and advisors and any other third parties who have access to our
proprietary know-how, information or technology to assign or grant similar rights to their inventions to us, we cannot be
certain that we have executed such agreements with all parties who may have contributed to our intellectual property,
nor can we be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that
they will not be breached, for which we may not have an adequate remedy.
An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to
operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our
ability to stop others from using or commercializing similar or identical technology and drugs, without payment to us, or
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could limit the duration of the patent protection covering our technology and drug candidates. Such challenges may also
result in our inability to manufacture or commercialize our drug candidates without infringing third-party patent rights.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could
dissuade companies from collaborating with us to license, develop or commercialize current or future drug candidates.
Even if they are unchallenged, our issued patents and our pending patents, if issued, may not provide us with
any meaningful protection or prevent competitors from designing around our patent claims to circumvent our owned or
licensed patents by developing similar or alternative technologies or drugs in a non-infringing manner. For example, a
third party may develop a competitive drug that provides benefits similar to one or more of our drug candidates but that
has a different composition that falls outside the scope of our patent protection. If the patent protection provided by the
patents and patent applications we hold or pursue with respect to our drug candidates is not sufficiently broad to impede
such competition, our ability to successfully commercialize our drug candidates could be negatively affected, which
would harm our business.
Third parties may initiate legal proceedings alleging that we 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.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture,
market and sell our drug candidates and use our proprietary technologies without infringing the proprietary rights and
intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and
frequent litigation regarding patents and other intellectual property rights. We may in the future become party to, or
threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our drug
candidates and technology, including interference proceedings before the USPTO. Our competitors or other third parties
may assert infringement claims against us, alleging that our drugs are covered by their patents. Given the vast number of
patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not
infringe patents that may be granted in the future. Many companies have filed, and continue to file, patent applications
related to kinase inhibitors. Some of these patent applications have already been allowed or issued, and others may issue
in the future. For example, we are aware of U.S. patents owned by third parties that have generic composition of matter
and method of treatment claims that may cover BLU-554 or generic method of treatment claims that may cover
BLU-667. If the claims of any of these third-party patents are asserted against us, we do not believe BLU-554, BLU-667
or our proposed activities related to such compounds would be found to infringe any valid claim of these patents. While
we may decide to initiate proceedings to challenge the validity of these patents in the future, we may be unsuccessful,
and courts or patent offices in the United States and abroad could uphold the validity of any such patents. If we were to
challenge the validity of any issued United States patent in court, we would need to overcome a statutory presumption of
validity that attaches to every United States patent. This means that in order to prevail, we would have to present clear
and convincing evidence as to the invalidity of the patent’s claims.
Since this area is competitive and of strong interest to pharmaceutical and biotechnology companies, there will
likely be additional patent applications filed and additional patents granted in the future, as well as additional research
and development programs expected in the future. Furthermore, because patent applications can take many years to issue
and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before
issuance, there may be applications now pending which may later result in issued patents that may be infringed by the
manufacture, use or sale of our drug candidates. If a patent holder believes our drug or drug candidate infringes on its
patent, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may
face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our
own patent portfolio may thus have no deterrent effect.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license
from such third party to continue developing and marketing our drug candidates and technology. However, we may not
be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a
license, it could be granted on non-exclusive terms, thereby providing our competitors and other third parties access to
the same technologies licensed to us. Without such a license, we could be forced, including by court order, to cease
developing and commercializing the infringing technology or drug candidates. In addition, we could be found liable for
monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed such third-
party patent rights. A finding of infringement could prevent us from commercializing our drug candidates or force us to
cease some of our business operations, which could materially harm our business.
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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 and other third parties may infringe, misappropriate or otherwise violate our patents and other
intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement
claims. A court may disagree with our allegations, however, and may refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the third-party technology in question. Further, such
third parties could counterclaim that we infringe their intellectual property or that a patent we have asserted against them
is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims challenging the validity,
enforceability or scope of asserted patents are commonplace. In addition, third parties may initiate legal proceedings
against us to assert such challenges to our intellectual property rights. The outcome of any such proceeding is generally
unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness or non-enablement. Patents may be unenforceable if someone connected with
prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during
prosecution. It is possible that prior art of which we and the patent examiner were unaware during prosecution exists,
which could render our patents invalid. Moreover, it is also possible that prior art may exist that we are aware of but do
not believe is relevant to our current or future patents, but that could nevertheless be determined to render our patents
invalid.
An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated
or interpreted narrowly. If a defendant were to prevail on a legal assertion of invalidity or unenforceability of our patents
covering one of our drug candidates, we would lose at least part, and perhaps all, of the patent protection covering such
drug candidate. Competing drugs may also be sold in other countries in which our patent coverage might not exist or be
as strong. If we lose a foreign patent lawsuit, alleging our infringement of a competitor’s patents, we could be prevented
from marketing our drugs in one or more foreign countries. Any of these outcomes would have a materially adverse
effect on our business.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their
normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is
unpredictable and generally expensive and time-consuming and is likely to divert significant resources from our core
business, including distracting our technical and management personnel from their normal responsibilities. 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. 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. Accordingly,
despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from
successfully challenging our intellectual property rights. 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.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission,
fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be
reduced or eliminated for non-compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of
procedural, documentary, fee payment and other similar provisions during the patent application process. In addition,
periodic maintenance fees on issued patents often must be paid to the USPTO and foreign patent agencies over the
lifetime of the patent. While an unintentional lapse can in many cases be cured by payment of a late fee or by other
means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or
lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
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Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not
limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly
legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our drugs or
procedures, we may not be able to stop a competitor from marketing drugs that are the same as or similar to our drug
candidates, which would have a material adverse effect on our business.
We may not be able to effectively enforce our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our drug candidates in all countries throughout the world would be
prohibitively expensive. The requirements for patentability may differ in certain countries, particularly in developing
countries. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by
unforeseen changes in foreign intellectual property laws. In addition, the patent laws of some foreign countries do not
afford intellectual property protection to the same extent as the laws of the United States. Many companies have
encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.
The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other
intellectual property rights. This could make it difficult for us to stop the infringement of our patents or the
misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory
licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to
prevent third parties from practicing our inventions in all countries outside the United States. Competitors may use our
technologies in jurisdictions where we have not obtained patent protection to develop their own drugs and, further, may
export otherwise infringing drugs to territories where we have patent protection, if our ability to enforce our patents to
stop infringing activities is inadequate. These drugs may compete with our drug candidates, and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.
Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in
substantial costs and divert our efforts and resources from other aspects of our business. Furthermore, while we intend to
protect our intellectual property rights in the major markets for our drug candidates, we cannot ensure that we will be
able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our drug candidates.
Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general,
thereby impairing our ability to protect our drug candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual
property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both
technological and legal complexity and is therefore costly, time-consuming and inherently uncertain. Recent patent
reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or Leahy-
Smith Act, signed into law on September 16, 2011, could increase those uncertainties and costs. The Leahy-Smith Act
includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent
applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to
challenge the validity of patents. In addition, the Leahy-Smith Act has transformed the U.S. patent system into a “first-
to-file” system. The first-to-file provisions, however, only became effective on March 16, 2013. Accordingly, it is not
yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-
Smith Act and its implementation could make it more difficult to obtain patent protection for our inventions and increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents, all of which could harm our business, results of operations and financial condition.
The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent
protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition,
there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if
adopted, could impact our ability to obtain patent protection for our proprietary technology or our ability to enforce our
proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant
law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways
that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in
the future.
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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be
harmed.
In addition to the protection afforded by patents, we rely upon unpatented trade secret protection, unpatented
know-how and continuing technological innovation to develop and maintain our competitive position. With respect to
the building of our proprietary compound library, we consider trade secrets and know-how to be our primary intellectual
property. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality
agreements with our collaborators, scientific advisors, employees and consultants, and invention assignment agreements
with our consultants and employees. We may not be able to prevent the unauthorized disclosure or use of our technical
know-how or other trade secrets by the parties to these agreements, however, despite the existence generally of
confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures is difficult,
and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of
the collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or violates
the terms of any of these agreements, we may not have adequate remedies for any such breach or violation, and we could
lose our trade secrets as a result. Enforcing a claim that a third party illegally obtained and is using our trade secrets, like
patent litigation, is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the
United States are sometimes less willing to protect trade secrets.
Our trade secrets could otherwise become known or be independently discovered by our competitors.
Competitors could purchase our drug candidates and attempt to replicate some or all of the competitive advantages we
derive from our development efforts, willfully infringe our intellectual property rights, design around our protected
technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of
our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to
prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If
our trade secrets are not adequately protected so as to protect our market against competitors’ drugs, our competitive
position could be adversely affected, as could our business.
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed
alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our
competitors.
We could in the future be subject to claims that we or our employees have inadvertently or otherwise used or
disclosed alleged trade secrets or other proprietary information of former employers or competitors. Although we try to
ensure that our employees and consultants do not use the intellectual property, proprietary information, know-how or
trade secrets of others in their work for us, we may in the future be subject to claims that we caused an employee to
breach the terms of his or her non-competition or non-solicitation agreement, or that we or these individuals have,
inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former
employer or competitor. Litigation may be necessary to defend against these claims. Even if we are successful in
defending against these claims, litigation could result in substantial costs and could be a distraction to management. If
our defenses to these claims fail, in addition to requiring us to pay monetary damages, a court could prohibit us from
using technologies or features that are essential to our drug candidates, if such technologies or features are found to
incorporate or be derived from the trade secrets or other proprietary information of the former employers. An inability to
incorporate such technologies or features would have a material adverse effect on our business, and may prevent us from
successfully commercializing our drug candidates. In addition, we may lose valuable intellectual property rights or
personnel as a result of such claims. Moreover, any such litigation or the threat thereof may adversely affect our ability
to hire employees or contract with independent sales representatives. A loss of key personnel or their work product could
hamper or prevent our ability to commercialize our drug candidates, which would have an adverse effect on our
business, results of operations and financial condition.
Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
We are highly dependent on the research and development, clinical, business development, financial and legal
expertise of Jeffrey W. Albers, our President and Chief Executive Officer, Anthony L. Boral, our Chief Medical Officer,
Marion Dorsch, our Chief Scientific Officer, Kathryn Haviland, our Chief Business Officer, Michael Landsittel, our
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Vice President of Finance, Tracey McCain, our Chief Legal Officer, and Christopher Murray, our Senior Vice President
of Technical Operations, as well as the other principal members of our management, scientific and clinical team.
Although we have entered into employment agreements with our executive officers, each of our executive officers may
terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or
other employees. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us
in formulating our research and development and commercialization strategy. Our consultants and advisors 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. If we are unable to continue to attract and retain high quality personnel, our
ability to pursue our growth strategy will be limited.
We expect to continue hiring qualified development personnel. Recruiting and retaining qualified scientific,
clinical, manufacturing and sales and marketing personnel will be critical to our success. The loss of the services of our
executive officers or other key employees could impede the achievement of our research, development and
commercialization objectives and seriously harm our ability to successfully implement our business strategy.
Furthermore, replacing key employees and executive officers may be difficult and may take an extended period of time
because of the limited number of individuals in our industry with the breadth of skills and experience required to
successfully develop, gain regulatory approval of and commercialize drugs. Competition to hire from this limited pool is
intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the
competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience
competition for the hiring of scientific and clinical personnel from universities and research institutions. Failure to
succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.
We will need to develop and expand our company, and we may encounter difficulties in managing this development
and expansion, which could disrupt our operations.
As of February 15, 2018, we had 149 full-time employees, and we expect to continue to increase our number of
employees and expand the scope of our operations. To manage our 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. Also, our management may need to divert a disproportionate amount of its
attention away from its day-to-day activities and devote a substantial amount of time to managing these development
activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or
recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to
operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining
employees. In the second quarter of 2017, we entered into a lease agreement for new office and laboratory space located
at 45 Sidney Street, Cambridge, Massachusetts 02139, and we relocated our corporate headquarters to the new premises
in the first quarter of 2018. Additional physical expansion of our operations in the future may lead to significant costs,
including capital expenditures, and may divert financial resources from other projects, such as the development of our
drug candidates. If our management is unable to effectively manage our expected development and expansion, our
expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may
not be able to implement our business strategy. Our future financial performance and our ability to commercialize our
drug candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future
development and expansion of our company.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of
operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the
global financial markets. For example, the global financial crisis caused extreme volatility and disruptions in the capital
and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a
variety of risks to our business, including, weakened demand for our drug candidates and our ability to raise additional
capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly
resulting in supply disruption, or cause our customers to delay making payments for our services.
Following its June 23, 2016 vote to leave the European Union, on March 29, 2017, the United Kingdom
invoked Article 50 of the Lisbon Treaty and formally began the process of exiting the European Union. Although Brexit
has already and may continue to adversely affect European and/or worldwide economic or market, political or regulatory
conditions and may contribute to instability in the global financial markets, political institutions and regulatory agencies,
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the resulting immediate changes in foreign currency exchange rates have had a limited overall impact due to natural
hedging. The long-term impact of Brexit, including on our business and our industry, will depend on the terms that are
negotiated in relation to the United Kingdom’s future relationship with the European Union, and we are closely
monitoring the Brexit developments in order to determine, quantify and proactively address changes as they become
clear. Despite the Brexit developments, we do not expect macroeconomic conditions to have a significant impact on our
liquidity needs, financial condition or results of operations.
We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters
and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect
on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event
occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical
infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted
operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of
time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a
serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster
recovery and business continuity plans, which, could have a material adverse effect on our business.
Our internal computer systems, or those of our third-party CROs or other contractors or consultants, may fail or
suffer security breaches, which could result in a material disruption of our drug candidates’ development programs.
Despite the implementation of security measures, our internal computer systems and those of our third-party
CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access,
natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such
system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data for our
drug candidates 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 results in a loss of or damage to our data or
applications or other data or applications relating to our technology or drug candidates, or inappropriate disclosure of
confidential or proprietary information, we could incur liabilities and the further development of our drug candidates
could be delayed.
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Our employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities,
including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk that our employees, principal investigators, CROs and consultants may engage in
fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or
negligent conduct or disclosure of unauthorized activities to us that violate the regulations of the FDA and other
regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such
authorities; healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that require the
reporting of financial information or data accurately. In particular, sales, marketing and business arrangements in the
healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-
dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials or
creating fraudulent data in our pre-clinical studies or clinical trials, which could result in regulatory sanctions and cause
serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, but it is not
always possible to identify and deter misconduct by employees and other third parties, 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 comply with
these laws or regulations. In addition, we are subject to the risk that a person could allege such fraud or other
misconduct, even if none occurred. 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, including the imposition
of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in
Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits
and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our
business and our results of operations.
We may acquire businesses or drugs, or form strategic alliances, in the future, and we may not realize the benefits of
such acquisitions.
We may acquire additional businesses or drugs, form strategic alliances or create joint ventures with third
parties that we believe will complement or augment our existing business. If we acquire businesses with promising
markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to
successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties
in developing, manufacturing and marketing any new drugs resulting from a strategic alliance or acquisition that delay or
prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any
such acquisition, we will achieve the expected synergies to justify the transaction.
We may be subject to adverse legislative or regulatory tax changes that could negatively impact our financial
condition.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons
involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which
changes may have retroactive application) could adversely affect our stockholders or us. In recent years, many such
changes have been made and changes are likely to continue to occur in the future. We cannot predict whether, when, in
what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided,
which could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we
operate in order to minimize increases in our tax liability.
On December 22, 2017, the Tax Cuts and Jobs Act, or TCJA, was enacted. The TCJA significantly reforms the
Internal Revenue Code of 1986, as amended. The TCJA, among other things, includes changes to U.S. federal tax rates,
imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards and allows
for the expensing of capital expenditures. Our net deferred tax assets and liabilities were revalued as of December 31,
2017 at the newly enacted U.S. corporate rate, and the impact was recognized in our tax expense in the year of
enactment but was offset by a corresponding reduction to the valuation allowance. We continue to examine the impact
this tax reform legislation may have on our business. The impact of this tax reform is uncertain and could be adverse.
77
Risks Related to Our Common Stock
The price of our common stock has been and may in the future be volatile and fluctuate substantially.
Our stock price has been and in the future may be subject to substantial volatility. In addition, the stock market
in general, and Nasdaq listed and biopharmaceutical companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
For example, our stock traded within a range of a high price of $92.00 and a low price of $13.04 per share for the period
beginning on April 30, 2015, our first day of trading on The Nasdaq Global Select Market, through February 15, 2018.
As a result of this volatility, our stockholders could incur substantial losses. In addition, the market price for our
common stock may be influenced by many factors, including:
•
•
•
•
•
•
•
•
•
•
the success of competitive drugs or technologies;
results of clinical trials of our drug candidates or those of our competitors;
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 drug candidates or clinical development programs;
the results of our efforts to discover, develop, acquire or in-license additional drug candidates or drugs;
actual or anticipated changes in estimates as to financial results, development timelines or
recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors;
•
•
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
These and other market and industry factors may cause the market price and demand for our common stock to
fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily
selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In the past,
when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation
against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur
substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.
An active trading market for our common stock may not be sustained, and investors may not be able to resell their
shares at or above the price they paid.
Although we have listed our common stock on The Nasdaq Global Select Market, an active trading market for
our shares may not be sustained. In the absence of an active trading market for our common stock, investors may not be
able to sell their common stock at or above the price at which they acquired their shares or at the time that they would
like to sell. An inactive trading market may also impair our ability to raise capital to continue to fund operations by
selling shares and may impair our ability to acquire other companies or technologies by using our shares as
consideration.
78
If equity research analysts do not publish research or reports about our business or if they publish negative
evaluations of or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock relies in part on the research and reports that equity research analysts
publish about us or our business. We do not control these analysts. We may never obtain research coverage by industry
or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely
decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their
evaluations of our common stock, the price of our common stock could decline. If one or more of these analysts cease to
cover our common stock, we could lose visibility in the market for our common stock, which in turn could cause our
common stock price to decline.
Our executive officers, directors, principal stockholders and their affiliates maintain the ability to exercise significant
influence over our company and all matters submitted to stockholders for approval.
Our executive officers, directors and stockholders who own more than 5% of our outstanding common stock,
together with their affiliates and related persons, beneficially own shares of common stock 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
influence our management and affairs and the outcome of matters submitted to our stockholders for approval, including
the election of directors and any sale, 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. In addition, this concentration of ownership might adversely affect the market price of our common stock
by:
•
•
•
delaying, deferring or preventing a change of control of us;
impeding a merger, consolidation, takeover or other business combination involving us; or
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control
of us.
Anti-takeover provisions in our 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 amended and restated certificate of incorporation and amended and restated bylaws may delay
or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a
prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue preferred
stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in
excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions
collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirors to
negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial
by some stockholders. In addition, 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, which is responsible for appointing the members of our management.
Future sales of our common stock, including by us or our directors and executive officers or shares issued upon the
exercise of currently outstanding options, could cause our stock price to decline.
A substantial portion of our outstanding common stock can be traded without restriction at any time. In
addition, a portion of our outstanding common stock is currently restricted as a result of federal securities laws, but can
be sold at any time subject to applicable volume limitations. As such, sales of a substantial number of shares of our
common stock in the public market could occur at any time. These sales, or the perception in the market that the holders
of a large number of shares intend to sell shares, by us or others, could reduce the market price of our common stock or
impair our ability to raise adequate capital through the sale of additional equity securities. In addition, we have a
significant number of shares that are subject to outstanding options. The exercise of these options and the subsequent
sale of the underlying common stock could cause a further decline in our stock price. These sales also might make it
79
difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We cannot predict
the number, timing or size of future issuances or the effect, if any, that any future issuances may have on the market
price for our common stock.
Commencing January 1, 2018, we are no longer an “emerging growth company,” and the reduced disclosure
requirements applicable to emerging growth companies no longer apply to us.
As of June 30, 2017, the market value of our common stock that was held by non-affiliates exceeded
$700 million, and as a result, as of January 1, 2018 we no longer qualified as an “emerging growth company,” as defined
in the Jumpstart Our Business Startups Act of 2012. As a large accelerated filer, we are subject to certain disclosure
requirements that are applicable to other public companies that were not applicable to us as an emerging growth
company. These requirements include:
•
•
•
•
compliance with the auditor attestation requirements in the assessment of our internal control over
financial reporting imposed by the Sarbanes-Oxley Act of 2002;
compliance with any requirement that may be adopted by the Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing
additional information about the audit and the financial statements;
full disclosure obligations regarding executive compensation; and
compliance with the requirements of holding a nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved.
In addition, we are no longer able to take advantage of transition periods for complying with new or revised
accounting standards that are available to emerging growth companies.
We have incurred and will continue to incur increased costs as a result of operating as a public company, and our
management is required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we have incurred and expect to continue to incur significant legal, accounting and other
expenses. In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the Securities and
Exchange Commission, or SEC, and Nasdaq have imposed various requirements on public companies, including
establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our
management and other personnel will need to devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations will increase our legal and financial compliance costs and make some activities
more time-consuming and costly.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish an
annual report by our management on our internal control over financial reporting. Because we are no longer an emerging
growth company, we are required to include with this annual report an attestation report on internal control over
financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404
within the prescribed period, we have been and will continue to be engaged in a process to document and evaluate our
internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to
dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and
document the adequacy of internal control over financial reporting, continue steps to improve control processes as
appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting
and improvement process for internal control over financial reporting.
Despite our efforts, there is a risk that in the future neither we nor our independent registered public accounting
firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is
effective as required by Section 404 or that we will not be able to comply with the requirements of Section 404 in a
timely manner. If this were to occur, the market price of our stock could decline and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which would require additional financial and management
resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a
80
decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control
over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If
we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial
reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from
our independent registered public accounting firm.
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. In addition, under the loan and security
agreement with Silicon Valley Bank, we are currently restricted from paying cash dividends, and we expect these
restrictions to continue in the future. In addition, the terms of any future debt agreements may preclude us from paying
dividends. 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.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an
“ownership change” (generally defined as a greater than 50% change (by value) in the ownership of its equity over a
three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-
change tax attributes to offset its post-change income may be limited. We may have experienced such ownership
changes in the past, and we may experience ownership changes in the future as a result of shifts in our stock ownership,
some of which are outside our control. As of December 31, 2017, we had federal net operating loss carryforwards of
approximately $288.6 million, and our ability to utilize those net operating loss carryforwards could be limited by an
“ownership change” as described above, which could result in increased tax liability to us. In addition, pursuant to the
TCJA, we may not use net operating loss carry-forwards to reduce our taxable income in any year by more than 80%,
and we may not carry back any net operating losses to prior years. These new rules apply regardless of the occurrence of
an ownership change.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our headquarters are located at 45 Sidney Street in Cambridge, Massachusetts where we occupy approximately
99,833 rentable square feet of office and laboratory space under a lease that commenced on October 1, 2017 and will
expire on November 30, 2029. The lease agreement also provides us with an option to extend the lease agreement for
two consecutive five-year periods at the then fair market annual rent, as defined in the lease agreement, as well as a right
of first offer with respect to leasing additional space adjacent to the existing leased premises.
We also lease our former corporate headquarters at 38 Sidney Street in Cambridge, Massachusetts under a lease
that will expire on October 31, 2022. The lease agreement also provides us with an option to extend the lease for five
additional years. In the first quarter of 2018, we fully subleased our former corporate headquarters through October 31,
2020. The sublessee has the option to extend the sublease through October 31, 2022, subject to specified exceptions
under the sublease agreement.
We believe that our existing office and laboratory space is sufficient to meet our needs for the foreseeable
future and that suitable additional space will be available as and when needed.
Item 3. Legal Proceedings.
We are not currently a party to any material legal proceedings.
81
Item 4. Mine Safety Disclosures.
Not applicable.
82
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Certain Information Regarding the Trading of Our Common Stock
Our common stock trades under the symbol “BPMC” on the Nasdaq Global Select Market and has been
publicly traded since April 30, 2015. Prior to this time, there was no public market for our common stock. The following
table sets forth the high and low sales prices of our common stock as reported on the Nasdaq Global Market for the
periods indicated:
Year Ended December 31, 2016:
High
Low
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
25.99 $
22.48 $
29.90 $
38.33 $
13.04
13.27
19.51
25.08
Year Ended December 31, 2017:
High
Low
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44.54 $
52.67 $
71.67 $
92.00 $
27.83
34.38
41.41
61.58
Holders
As of February 15, 2018, there were approximately 21 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 never declared or paid cash dividends on our capital stock. We currently intend to retain all available
funds and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate
paying any cash dividends in the foreseeable future. In addition, pursuant to our loan and security agreement with
Silicon Valley Bank, we are prohibited from paying cash dividends without the prior written consent of Silicon Valley
Bank. Moreover, the terms of any future debt agreements may preclude us from paying dividends. Any future
determination to pay dividends will be made at the discretion of our board of directors and will depend on various
factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors
deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of
receiving cash dividend.
Stock 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, nor shall such information be incorporated by reference into any future
filing under the Exchange Act or 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 performance graph compares the performance of our common stock to the Nasdaq Composite
Index and to the Nasdaq Biotechnology Index from April 30, 2015 (the first date that shares of our common stock were
publicly traded) through December 31, 2017. The comparison assumes $100 was invested in our common stock and in
each of the foregoing indices after the market closed on April 30, 2015, and it assumes reinvestment of dividends, if any.
83
The stock price performance included in this graph is not necessarily indicative of, nor is it intended to forecast, future
stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
Among Blueprint Medicines Corporation, The Nasdaq Composite Index and The Nasdaq Biotechnology Index
$425.00
$400.00
$375.00
$350.00
$325.00
$300.00
$275.00
$250.00
$225.00
$200.00
$175.00
$150.00
$125.00
$100.00
$75.00
$50.00
Blueprint Medicines Corporation
Nasdaq Composite Index
Nasdaq Biotechnology Index
Item 6. Selected Financial Data.
You should read the following selected consolidated financial data together with our financial statements and
the related notes appearing at the end of this Annual Report on Form 10-K and Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K. We have
derived the consolidated statement of operations data for the years ended December 31, 2017, 2016 and 2015 and the
consolidated balance sheet data as of December 31, 2017 and 2016 from our audited consolidated financial statements
included elsewhere in this Annual Report on Form 10-K. We have derived the consolidated statement of operations data
for the year ended December 31, 2014 and the consolidated balance sheet data as of December 31, 2015 and 2014 from
our audited consolidated financial statements and related notes not included in this Annual Report on Form 10-K. The
selected historical financial information in this section is not intended to replace our financial statements and the related
84
notes thereto. Our historical results for any prior period are not necessarily indicative of results to be expected in any
future period.
Year Ended
December 31,
2017
2016
2015
2014
(in thousands, except per share data)
Statements of Operations Data:
Collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,426 $ 27,772 $ 11,400 $
Operating expenses:
—
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
144,687
27,986
172,673
81,131
19,218
100,349
48,588
14,456
63,044
31,844
7,890
39,734
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
(98)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(453)
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(551)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (148,119) $ (72,495) $ (52,769) $ (40,285)
Convertible preferred stock dividends . . . . . . . . . . . . . . . . . . . . . .
(5,765)
Net loss applicable to common stockholders . . . . . . . . . . . . . . . . $ (148,119) $ (72,495) $ (55,922) $ (46,050)
Net loss per share applicable to common stockholders — basic
(429)
(696)
(1,125)
3,349
(221)
3,128
551
(469)
82
(3,153)
—
—
and diluted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3.92) $
(2.64) $
(3.07) $ (32.41)
Weighted-average number of common shares used in net loss
per share applicable to common stockholders — basic and
diluted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,793
27,492
18,236
1,421
(1) See Note 12, “Net Loss per Share” in the accompanying notes to our audited consolidated financial statements appearing elsewhere in this
Annual Report on Form 10-K for further details on the calculation of basic and diluted net loss per share applicable to common
stockholders.
As of
December 31,
2017
2016
2015 (1)
2014
(in thousands)
Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400,304 $ 52,069 $ 162,707 $ 47,240
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Working capital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,510
49,925
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,042
Warrant liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
365
114,811
Convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . .
(79,382)
216,149
191,913
282,795
47,235
4,069
—
—
213,078
273,052
642,615
715,737
35,373
1,518
—
—
623,970
—
151,776
178,898
13,640
7,338
—
—
143,979
(1) Upon the closing of our IPO in May 2015, all outstanding shares of our convertible preferred stock were converted into 15,467,479 shares
of common stock, and warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for
42,423 shares of common stock.
(2) We define working capital as current assets less current liabilities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our audited consolidated financial statements and related notes appearing 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. As a result of many factors, including those factors set
forth in the ‘‘Risk Factors’’ section of this Annual Report on Form 10-K, our actual results or timing of certain events
could differ materially from the results or timing described in, or implied by, these forward-looking statements.
85
Overview
We are a biopharmaceutical company focused on developing potentially transformational medicines to improve
the lives of patients with genomically defined cancers and rare diseases. Our approach is to leverage our novel target
discovery engine to systematically and reproducibly identify kinases that are drivers of diseases in genomically defined
patient populations and to craft highly selective and potent drug candidates that may provide significant and durable
clinical responses for patients without adequate treatment options. This integrated biology and chemistry approach
enables us to identify, characterize and design drug candidates to inhibit novel kinase targets that have been difficult to
selectively inhibit. By focusing on diseases in genomically defined patient populations, we believe that we will have a
more efficient development path with a greater likelihood of success.
Our most advanced drug candidates are avapritinib (formerly known as BLU-285), BLU-554 and BLU-667.
Our lead drug candidate, avapritinib, is an orally available, potent and highly selective inhibitor that targets KIT and
PDGFR(cid:302) mutations. These mutations abnormally activate receptor tyrosine kinases that are drivers of cancer and
proliferative disorders, including gastrointestinal stromal tumors, or GIST, and systemic mastocytosis, or SM. We are
currently evaluating avapritinib in an ongoing Phase 1 clinical trial for defined subsets of patients with GIST, which we
refer to as the Navigator trial, and an ongoing Phase 1 clinical trial for advanced SM, which we refer to as the Explorer
trial. GIST is a rare disease that is a sarcoma, or tumor of bone or connective tissue, of the gastrointestinal tract, or
GI tract, and SM is a rare disorder that causes an overproduction of mast cells and the accumulation of mast cells in the
bone marrow and other organs, which can lead to a wide range of debilitating symptoms and organ dysfunction and
failure.
BLU-554 is an orally available, potent and highly selective inhibitor that targets FGFR4, a kinase that is
aberrantly activated in a defined subset of patients with hepatocellular carcinoma, or HCC, the most common type of
liver cancer. We are currently evaluating BLU-554 in an ongoing Phase 1 clinical trial in patients with advanced HCC.
BLU-667 targets RET, a receptor tyrosine kinase that is abnormally activated by mutations or translocations,
and RET resistance mutations that we predict will arise from treatment with first generation therapies. RET drives
disease in subsets of patients with non-small cell lung cancer, or NSCLC, and cancers of the thyroid, including
medullary thyroid carcinoma, or MTC, and papillary thyroid cancer, and our research suggests that RET may drive
disease in subsets of patients with colon cancer, breast cancer and other cancers. We are currently evaluating BLU-667
in an ongoing Phase 1 clinical trial in patients with RET-altered NSCLC, MTC and other advanced solid tumors.
In addition, in the fourth quarter of 2017, we nominated a development candidate, BLU-782, for our discovery
program targeting the kinase ALK2 for the treatment of fibrodysplasia ossificans progressiva, or FOP, a rare genetic
disease caused by mutations in the ALK2 gene, ACVR1. We anticipate initiating IND-enabling studies for BLU-782 in
the first half of 2018.
We plan to continue to leverage our discovery platform to systematically and reproducibly identify kinases that
are drivers of diseases in genomically defined patient populations and craft drug candidates that potently and selectively
target these kinases. We currently have two wholly-owned discovery programs for undisclosed kinase targets, and we
anticipate nominating at least two additional discovery programs in 2018.
In addition to our wholly-owned clinical and pre-clinical programs, in March 2016, we entered into an
agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. to discover, develop and commercialize up to
five small molecule therapeutics targeting kinases believed to be important in cancer immunotherapy, as single products
or possibly in combination with other therapeutics. We will continue to evaluate additional collaborations that could
maximize the value for our programs and allow us to leverage the expertise of strategic collaborators. We are also
focused on engaging in collaborations to capitalize on our discovery platform outside of our primary strategic focus area
of cancer.
We currently have worldwide development and commercialization rights to avapritinib, BLU-554, BLU-667
and BLU-782 and all of our discovery programs other than the pre-clinical programs under the Roche collaboration. In
September 2015, the FDA granted orphan drug designation to BLU-554 for the treatment of HCC, and in January 2016,
the FDA granted orphan drug designation to avapritinib for the treatment of GIST and mastocytosis. In October 2016,
the FDA granted fast track designation to avapritinib for the treatment of patients with unresectable or metastatic GIST
that progressed following treatment with imatinib and a second tyrosine kinase, or TKI, inhibitor and for the treatment of
86
patients with unresectable or metastatic GIST with the PDGFR(cid:302) D842V mutation regardless of prior therapy. In
addition, in June 2017, the FDA granted breakthrough therapy designation to avapritinib for the treatment of patients
with unresectable or metastatic GIST harboring the PDGFR(cid:302) D842V mutation, and in July 2017, the European
Commission granted orphan drug designation to avapritinib for the treatment of GIST.
Since inception, our operations have focused on organizing and staffing our company, business planning,
raising capital, establishing our intellectual property, building our discovery platform, including our proprietary
compound library and new target discovery engine, identifying kinase drug targets and potential drug candidates,
producing drug substance and drug product material for use in pre-clinical studies and clinical trials, conducting pre-
clinical studies, including GLP toxicology studies and commencing clinical development activities. We do not have any
drugs approved for sale and have not generated any revenue from drug sales.
To date, we have financed our operations primarily through public offerings of our common stock, private
placements of our convertible preferred stock, collaborations and a debt financing. Through December 31, 2017, we
have received an aggregate of $1.1 billion from such transactions, including $887.4 million in aggregate gross proceeds
from the sale of common stock in our May 2015 initial public offering, or IPO, and December 2016, April 2017 and
December 2017 follow-on public offerings, $115.1 million in gross proceeds from the issuance of convertible preferred
stock, $18.8 million of upfront and milestone payments under our former collaboration with Alexion Pharma Holding, or
Alexion, a $45.0 million upfront payment under our existing collaboration with F. Hoffmann-La Roche Ltd and
Hoffmann-La Roche Inc., which we refer to collectively as Roche, and $10.0 million in gross proceeds from the debt
financing.
Since inception, we have incurred significant operating losses. Our net losses were $148.1 million,
$72.5 million and $52.8 million for the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017, we
had an accumulated deficit of $355.6 million. We expect to continue to incur significant expenses and operating losses
over the next several years. We anticipate that our expenses will increase significantly in connection with our ongoing
activities, particularly as we:
•
•
•
•
•
•
•
continue to advance and initiate clinical development activities for our lead drug candidate,
avapritinib, as well as our other most advanced drug candidates, BLU-554, BLU-667 and BLU-782;
seek marketing approvals for our drug candidates that successfully complete clinical trials;
establish a sales, marketing and distribution infrastructure to commercialize any medicines for which
we may obtain marketing approval;
continue to manufacture increasing quantities of drug substance and drug product material for use in
pre-clinical studies, clinical trials and for any potential commercialization;
continue to discover, validate and develop additional drug candidates;
conduct research and development activities under our collaboration with Roche;
conduct development and commercialization activities for companion diagnostic tests, including our
companion diagnostic tests for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V
mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway activation and BLU-667 in
order to identify NSCLC patients with RET fusions;
• maintain, expand and protect our intellectual property portfolio;
•
•
•
acquire or in-license other drug candidates or technologies;
hire additional research, clinical, quality, manufacturing and commercial personnel; and
incur additional costs associated with operating as a public company.
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Financial Operations Overview
Revenue
To date, we have not generated any revenue from drug sales and do not expect to generate any revenue from the
sale of drugs in the near future. Our revenue consists of collaboration revenue under our former collaboration with
Alexion, which was terminated in October 2017, and our existing collaboration with Roche, including amounts that are
recognized related to upfront payments, milestone payments and amounts due to us for research and development
services. In the future, revenue may include additional milestone payments and royalties on any net product sales under
our collaboration with Roche. As a result of the termination of our Alexion collaboration, we will not be entitled to
receive any future payments from Alexion for any research and development expenses or milestones. We expect that any
revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research
and development reimbursements, payments for manufacturing services, and milestone and other payments.
In the future, we will seek to generate revenue from a combination of drug sales and additional strategic
relationships we may enter into.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development
activities, including our drug discovery efforts, and the development of our drug candidates, which include:
•
•
•
•
•
•
employee-related expenses including salaries, benefits, and stock-based compensation expense;
expenses incurred under agreements with third parties that conduct research and development, pre-
clinical activities, clinical activities and manufacturing on our behalf;
expenses incurred under agreements with third parties for the development and commercialization of
companion diagnostic tests;
the cost of consultants;
the cost of lab supplies and acquiring, developing and manufacturing pre-clinical study materials,
clinical trial materials and commercial supply materials; and
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and
maintenance of facilities, insurance, and other operating costs.
Research and development costs are expensed as incurred. Costs for certain activities are recognized based on
an evaluation of the progress to completion of specific tasks. Nonrefundable advance payments for goods or services to
be received in the future for use in research and development activities are capitalized. The capitalized amounts are
expensed as the related goods are delivered or the services are performed.
The successful development of our drug 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 of these drug candidates. We are also unable to predict when, if ever, material net cash
inflows will commence from our drug candidates. This is due to the numerous risks and uncertainties associated with
developing drugs, including the uncertainty of:
•
•
•
establishing an appropriate safety profile with IND-enabling toxicology studies;
successful enrollment in, and completion of clinical trials;
receipt of marketing approvals from applicable regulatory authorities;
88
•
•
•
•
establishing commercial manufacturing capabilities or making arrangements with third-party
manufacturers;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our drug
candidates;
commercializing the drug candidates, if and when approved, whether alone or in collaboration with
others; and
continued acceptable safety profile of the drugs following approval.
A change in the outcome of any of these variables with respect to the development of any of our drug
candidates would significantly change the costs and timing associated with the development of that drug candidate.
Research and development activities are central to our business model. Drug 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
to increase significantly for the foreseeable future as our drug candidate development programs progress. However, we
do not believe that it is possible at this time to accurately project total program-specific expenses through
commercialization. There are numerous factors associated with the successful commercialization of any of our drug
candidates, including future trial design and various regulatory requirements, many of which cannot be determined with
accuracy at this time based on our stage of development. In addition, future commercial and regulatory factors beyond
our control will impact our clinical development programs and plans.
A significant portion of our research and development expenses have been external expenses, which we track
on a program-by-program basis following nomination as a development candidate. Our internal research and
development expenses are primarily personnel-related expenses, including stock-based compensation expense. We do
not track our internal research and development expenses on a program-by-program basis as they are deployed across
multiple projects under development.
The following table summarizes our external research and development expenses by program for the years
ended December 31, 2017, 2016 and 2015. Other development and pre-development candidate expenses, unallocated
expenses and internal research and development expenses have been classified separately.
2017
Year Ended December 31,
2016
(in thousands)
2015
Avapritinib external expenses . . . . . . . . . . . . . . . . . . . . . . . . . $
BLU-554 external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
BLU-667 external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
BLU-782 external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other development and pre-development candidate
expenses and unallocated expenses . . . . . . . . . . . . . . . . . . . .
Internal research and development expenses. . . . . . . . . . . . . .
Total research and development expenses . . . . . . . . . . . . . . . . $
$
46,851
15,078
13,512
1,114
39,981
28,151
144,687
$
10,653
13,160
6,599
—
32,232
18,487
81,131
$
6,338
5,134
—
—
23,104
14,012
48,588
We expect that our research and development expenses will increase in future periods as we expand our
operations and incur additional costs in connection with our clinical trials. These increases will likely include the costs
related to the implementation and expansion of clinical trial sites and related patient enrollment, monitoring, program
management and drug product and drug substance manufacturing expenses. In addition, we expect that our research and
development expenses will increase in future periods as we incur additional costs in connection with research and
development activities under our collaboration with Roche and development activities for companion diagnostic tests,
including our companion diagnostic tests for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V
mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway activation and BLU-667 in order to identify
NSCLC patients with RET fusions.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based
compensation, for personnel in executive, finance, accounting, commercial, business development, legal and human
resources functions. Prior to 2017, stock-based compensation included expense associated with stock-based awards
issued to non-employees, including directors for non-board related services. Other significant costs include facility costs
not otherwise included in research and development expenses, pre-commercial development activities, legal fees relating
to patent and corporate matters and fees for accounting and consulting services.
We expect that our general and administrative expenses will increase in the future to support continued research
and development activities, including as we continue our existing clinical trials and initiate additional clinical trials, as
well as pre-commercial development activities. These increases will likely include increased costs related to the hiring of
additional personnel, legal, auditing and filing fees and general compliance and consulting expenses, among other
expenses. We have incurred and will continue to incur additional costs associated with operating as a public company.
Other Income (Expense), net
Other income (expense), net consists primarily of income earned on cash equivalents and investments and the
re-measurement gain or loss associated with the change in the fair value of the convertible preferred stock warrant
liability in periods prior to our IPO.
Interest Expense
Interest expense consists primarily of interest expense on amounts outstanding under a loan and security
agreement that we entered into with Silicon Valley Bank in May 2013 and amortization of debt discount.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these consolidated financial statements requires us to make judgments and estimates that
affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and
liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and
events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and
estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any,
will be reflected in the consolidated financial statements prospectively from the date of change in estimates.
Our critical accounting policies are those policies that require the most significant judgments and estimates in
the preparation of our financial statements. Management has determined that our most critical accounting policies are
those relating to available-for-sale investments, revenue recognition, accrued research and development expenses and
stock-based compensation.
Available-for-Sale Investments
We classify marketable securities with a remaining maturity when purchased of greater than three months as
available-for-sale. Marketable securities with a remaining maturity date greater than one year are classified as non-
current. Available-for-sale securities are maintained by an investment manager and may consist of U.S. Treasury
securities and U.S. government agency securities. Available-for-sale securities are carried at fair value with the
unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity until
realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense
over the life of the instrument. Realized gains and losses are determined using the specific identification method and are
included in other income (expense). If any adjustment to fair value reflects a decline in value of the investment, we
consider all available evidence to evaluate the extent to which the decline is “other-than-temporary” and, if so, mark the
investment to market through a charge to our statement of operations and comprehensive loss.
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Revenue Recognition
We recognize revenue from license and collaboration agreements in accordance with Financial Accounting
Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 605, Revenue Recognition, or ASC 605.
Accordingly, revenue is recognized when all of the following criteria are met:
•
•
•
•
persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered;
the seller’s price to the buyer is fixed or determinable; and
collectability is reasonably assured.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in our
balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are
classified as deferred revenue, current portion. Amounts not expected to be recognized as revenue within the 12 months
following the balance sheet date are classified as deferred revenue, net of current portion.
Our revenue is currently generated through our existing collaboration with Roche. For periods prior to
January 1, 2018, our revenue was generated through our former collaboration with Alexion and our existing
collaboration with Roche. During the year ended December 31, 2017, we recognized revenue under our former
collaboration with Alexion of $16.2 million, which represents $9.5 million of reimbursable research and development
costs, as well as a portion of the $15.0 million upfront payment and a $1.8 million non-substantive milestone payment
previously received. During the year ended December 31, 2017, we received $12.7 million related to reimbursable
research and development costs under our former collaboration with Alexion. During the year ended December 31,
2017, we recognized revenue under the Roche collaboration of $5.2 million, which represents a portion of a
$45.0 million upfront payment.
Our collaboration agreement with Roche contains multiple elements, or deliverables, including an exclusive
license granted by us to Roche to research, develop, manufacture and commercialize the licensed products and the
compounds in the field in the territory, as well as research and development activities to be performed by us on behalf of
Roche related to the licensed product candidates. In addition, the terms of the Roche agreements includes payments to us
of one or more of the following: a nonrefundable, upfront payment; contingent milestone payments related to specified
pre-clinical milestones, development milestones and sales-based commercial milestones; fees for research and
development services rendered; and royalties on commercial sales of licensed product candidates, if any. To date, we
have received the upfront payment upon execution of the Roche agreement. We are eligible to earn additional milestone
payments under the Roche collaboration. We have not earned royalty revenue as a result of product sales under the
Roche collaboration.
Our collaboration agreement with Alexion, which terminated effective October 2017, also contained multiple
deliverables. Under the former Alexion collaboration, we received an upfront payment upon execution of the Alexion
collaboration agreement and payments for the achievement of certain pre-clinical milestones and research and
development services. We did not earn royalty revenue as a result of product sales under the former Alexion
collaboration agreement, and as a result of the termination of the Alexion collaboration, we will not be entitled to receive
payment from Alexion for any additional milestones or research and development expenses.
When evaluating multiple element arrangements, we consider whether the deliverables under the arrangement
represent separate units of accounting. This evaluation requires subjective determinations and requires management to
make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of
the contractual relationship. In determining the units of accounting, management evaluates certain criteria, including
whether the deliverables have standalone value, based on the consideration of the relevant facts and circumstances for
each arrangement. The consideration received is allocated among the separate units of accounting using the relative
selling price method, and the applicable revenue recognition criteria are applied to each of the separate units.
Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer
on a stand-alone basis, and (ii) if the arrangement includes a general right of return relative to the delivered item(s),
delivery or performance of the undelivered item(s) is considered probable and substantially in our control. In assessing
whether an item has stand-alone value, we consider factors such as the research, manufacturing and commercialization
91
capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In
addition, we consider whether the collaboration partner can use the other deliverable(s) for their intended purpose
without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered
item(s) and whether there are other vendors that can provide the undelivered element(s). Our collaboration agreement
with Roche does not contain, and our terminated collaboration agreement with Alexion did not contain, a general right of
return relative to the delivered item(s).
Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting
using the relative selling price method. Then, the applicable revenue recognition criteria in ASC 605-25 are applied to
each of the separate units of accounting in determining the appropriate period and pattern of recognition. We determine
the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, we
determine the estimated selling price for units of accounting within each arrangement using vendor-specific objective
evidence, or VSOE, of selling price, if available, third-party evidence, or TPE, of selling price if VSOE is not available,
or best estimate of selling price, or BESP, if neither VSOE nor TPE is available. We typically use BESP to estimate the
selling price, since it generally does not have VSOE or TPE of selling price for its units of accounting. Determining the
BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, we
consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in
negotiating the agreement with the customer and estimated costs. We validate the BESP for units of accounting by
evaluating whether changes in the key assumptions used to determine the BESP will have a significant effect on the
allocation of arrangement consideration between multiple units of accounting.
In the event that an element of a multiple element arrangement does not represent a separate unit of accounting,
we recognize revenue from the combined element over the period over which we expect to fulfill its performance
obligations or as undelivered items are delivered, as appropriate, if all of the other revenue recognition criteria in
ASC 605-25 are met. If the pattern of performance in which the service is provided to the customer can be determined
and objectively measurable performance measures exist, then we recognize revenue under the arrangement using the
proportional performance method. If there is no discernible pattern of performance and/or objectively measurable
performance measures do not exist, then we recognize revenue under the arrangement on a straight-line basis over the
period we are expected to complete our performance obligations. Revenue recognized is limited to the lesser of the
cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-
line method or proportional performance method, as applicable, as of the period ending date.
Our multiple-element revenue arrangements may include the following:
Exclusive Licenses. The deliverables under our collaboration agreements may include exclusive licenses to
research, develop, manufacture and commercialize licensed products. To account for this element of an arrangement,
management evaluates whether an exclusive license has stand-alone value from the undelivered elements based on the
consideration of the relevant facts and circumstances of the arrangement, including the research and development
capabilities of the collaboration partner. We may recognize the arrangement consideration allocated to licenses upon
delivery of the license if facts and circumstances indicate that the license has stand-alone value from the undelivered
elements, which generally include research and development services. We defer arrangement consideration allocated to
licenses if facts and circumstances indicate that the delivered license does not have stand-alone value from the
undelivered elements.
When management believes a license does not have stand-alone value from the other deliverables to be
provided in the arrangement, we recognize revenue attributed to the license on a proportional basis over our contractual
or estimated performance period, which is typically the term of our research and development obligations. If
management cannot reasonably estimate when our performance obligation ends, then revenue is deferred until
management can reasonably estimate when the performance obligation ends. The periods over which revenue should be
recognized are subject to estimates by management and may change over the course of the research and development
and licensing agreement. Such a change could have a material impact on the amount of revenue we record in future
periods.
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Research and Development Services. The deliverables under our collaboration agreements may include research
and development services to be performed by us on behalf of the partner. Payments or reimbursements resulting from
our research and development efforts are recognized as the services are performed and presented on a gross basis
because we are the principal for such efforts, so long as there is persuasive evidence of an arrangement, the fee is fixed
or determinable, and collection of the related amount is reasonably assured.
Milestone Revenue. Our collaboration agreements may include contingent milestone payments related to
specified pre-clinical milestones, development milestones and sales-based commercial milestones.
At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone is
substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an
assessment of whether:
•
•
•
the consideration is commensurate with either our performance to achieve the milestone or the
enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the
our performance to achieve the milestone;
the consideration relates solely to past performance; and
the consideration is reasonable relative to all of the deliverables and payment terms within the
arrangement.
We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be
overcome to achieve the respective milestone and the level of effort and investment required to achieve the respective
milestone in making this assessment. There is considerable judgment involved in determining whether a milestone
satisfies all of the criteria required to conclude that a milestone is substantive. Milestones that are not considered
substantive are accounted for as license payments and recognized over the remaining period of performance from the
date of achievement of the milestone. Milestones that are considered substantive will be recognized in their entirety upon
successful accomplishment of the milestone, assuming all other revenue recognition criteria are met.
Royalty Revenue. We will recognize royalty revenue in the period of sale of the related product(s), based on the
underlying contract terms, provided that the reported sales are reliably measurable, and we have no remaining
performance obligations, assuming all other revenue recognition criteria are met.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our
accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders,
communicating with our personnel to identify 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. The majority of our service providers invoice us monthly in arrears for services performed or
when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date 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. The significant estimates in our accrued research and development
expenses include the costs incurred for services performed by our vendors in connection with research and development
activities for which we have not yet been invoiced.
We base our expenses related to research and development activities on our estimates of the services received
and efforts expended pursuant to quotes and contracts with vendors 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. Non-refundable advance payments for goods and services that will be used in future research and
development activities are expensed when the activity has been performed or when the goods have been received rather
than when the payment is made.
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Although we do not expect our estimates to be materially different from amounts actually incurred, if our
estimates of the status and timing of services performed differ from the actual status and timing of services performed, it
could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no
material differences between our estimates of such expenses and the amounts actually incurred.
Stock-Based Compensation
We expense the fair value of employee stock awards over the requisite service period, which is typically the
vesting period. Prior to 2017, expense was recognized net of estimated forfeitures and adjusted to reflect actual
forfeitures. Effective January 1, 2017, upon adoption of ASU No. 2016-09, Compensation — Stock Compensation under
the modified retrospective approach, we began recognizing gross stock compensation expense with actual forfeitures
recognized as they occur. Compensation cost for restricted stock awards issued to employees is measured using the grant
date intrinsic value of the award and is adjusted to reflect actual forfeitures. We estimate the fair value of options granted
to employees at the date of grant using the Black-Scholes option-pricing model that requires management to apply
judgment and make estimates, including:
•
•
•
•
•
expected volatility, which is calculated based on reported volatility data for a representative group of
publicly traded companies for which historical information is available. Prior to April 30, 2015, we
were a privately-held company and lacked company-specific historical and implied volatility
information. As such, we have used an average of expected volatility based on the volatilities of a
representative group of publicly traded biopharmaceutical companies for a period equal to the
expected term of the option grant. Beginning in the fourth quarter of 2015, we began to include our
own volatility into the average calculation. We intend to consistently apply this process using
representative companies until a sufficient amount of historical information regarding the volatility of
our own share price becomes available;
risk-free interest rate, which is based on the U.S. Treasury yield curve in effect at the time of grant
commensurate with the expected term assumption;
expected term, which we calculate using the simplified method, as prescribed by the Securities and
Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, as we have
insufficient historical information regarding our stock options to provide a basis for an estimate;
prior to becoming a public company, fair value estimates of the underlying shares of common stock,
which were determined using the option-pricing method, or OPM, or a hybrid of the
probability-weighted expected return method and the OPM and were approved by our board of
directors. Upon becoming a public company, the fair value of the underlying shares of common stock
equals the closing price of our stock on The Nasdaq Global Select Market on the date of grant; and
dividend yield, which is zero based on the fact that we never paid cash dividends and do not expect to
pay any cash dividends in the foreseeable future.
We have computed the fair value of stock options at the date of grant using the following weighted-average
assumptions:
Year Ended
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2017 December 31, 2016 December 31, 2015
1.66 %
— %
6.0
85.43 %
1.55 %
— %
6.0
75.94 %
2.07 %
— %
6.0
74.58 %
Stock-based awards issued to non-employees, including directors for non-board related services, are accounted
for based on the fair value of such services received or of the intrinsic value of equity instruments issued, whichever is
more reliably measured. These stock-based awards are revalued at each vesting date and period-end. Stock-based awards
subject to service-based vesting conditions are expensed on a straight-line basis over the vesting period. In accordance
94
with the Accounting Standards Codification, or ASC, 718, stock-based awards subject to both performance-and
service-based vesting conditions are recognized using an accelerated attribution model.
Results of Operations
Comparison of Years Ended December 31, 2017 and 2016
The following table summarizes our results of operations for the years ended December 31, 2017 and 2016,
together with the changes in those items in dollars and as a percentage:
Collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating expenses:
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Year Ended
December 31,
2017
2016
(in thousands)
Dollar Change % Change
21,426 $ 27,772 $
(6,346)
(23)%
144,687
27,986
172,673
81,131
19,218
100,349
63,556
8,768
72,324
78
46
72
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,798
248
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,046
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (148,119) $ (72,495) $ (75,624)
3,349
(221)
3,128
551
(469)
82
508
53
3,715
(104)%
Collaboration Revenue
Collaboration revenue decreased by $6.4 million from $27.8 million for the year ended December 31, 2016 to
$21.4 million for the year ended December 31, 2017. Collaboration revenue for the year ended December 31, 2017 was
related to the Alexion and Roche agreements. We recorded collaboration revenue of $16.2 million and $23.3 million
under the Alexion collaboration for the years ended December 31, 2017 and December 31, 2016, respectively. The
decrease was primarily due to lower reimbursable research and development expenses as a result of the termination of
the agreement and the impact of the recognition of two milestone payments upon achievement included in the year
ended December 31, 2016. As a result of the termination of the Alexion collaboration, we recognized the remaining
deferred revenue balance related to the upfront payment and non-substantive milestone payment previously received
under the collaboration utilizing the proportional performance model over the remaining period of performance, which
ended October 24, 2017. We were not entitled to receive payment from Alexion for any research and development
expenses incurred after the effective date of termination or any additional milestones. As a result of the termination of
the Alexion collaboration, we anticipate collaboration revenue related to reimbursable research and development
expenses will decrease significantly in future periods. We entered into the Roche agreement in March 2016 and recorded
$5.2 million and $4.5 million in collaboration revenue under the Roche agreement for the years ended December 31,
2017 and December 31, 2016, respectively.
Research and Development Expense
Research and development expense increased by $63.6 million from $81.1 million for the year ended
December 31, 2016 to $144.7 million for the year ended December 31, 2017. The increase in research and development
expense was primarily related to the following:
•
•
approximately $24.7 million in increased expenses associated with clinical and commercial
manufacturing activities;
approximately $20.3 million in increased expenses for external clinical activities as we advanced our
lead drug candidates, avapritinib, BLU-554 and BLU-667, further through Phase 1 clinical trials;
95
•
•
approximately $15.0 million in increased personnel expense primarily due to a 35% increase in
headcount and an increase of $3.6 million in stock-based compensation expense, which were driven by
growth in the clinical and manufacturing organizations; and
approximately $0.9 million in increased expenses associated with continuing to build our discovery
platform and advance our discovery pipeline.
General and Administrative Expense
General and administrative expense increased by $8.8 million from $19.2 million for the year ended
December 31, 2016 to $28.0 million for the year ended December 31, 2017. The increase in general and administrative
expense was primarily related to the following:
•
•
approximately $5.1 million in increased personnel expenses due to an increase of 35% in general and
administrative headcount to support our overall growth as a publicly traded company and an increase
of $2.8 million in stock-based compensation expense; and
approximately $2.8 million in increased professional fees including market research and public
relations costs.
Other Income (Expense), Net
Other income, net, increased by $2.7 million from $0.6 million for the year ended December 31, 2016 to
$3.3 million for the year ended December 31, 2017. The increase in other income, net, was primarily related to an
increase in investment income during the year ended December 31, 2017.
Interest Expense
Interest expense decreased by $0.3 million from $0.5 million for the year ended December 31, 2016 to
$0.2 million for the year ended December 31, 2017. The decrease was primarily related to a decrease in the average
outstanding principle balance under the loan and security agreement with Silicon Valley Bank for the year ended
December 31, 2017. We expect that interest expense will continue to decrease in subsequent periods as the principal
amount under the loan decreases.
Comparison of Years Ended December 31, 2016 and 2015
The following table summarizes our results of operations for the years ended December 31, 2016 and 2015,
together with the changes in those items in dollars and as a percentage:
Year Ended
December 31,
2016
2015
Dollar Change % Change
(in thousands)
Collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,772 $ 11,400 $
Operating expenses:
16,372
144 %
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81,131
19,218
100,349
551
(469)
82
48,588
14,456
63,044
(429)
(696)
(1,125)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (72,495) $ (52,769) $
32,543
4,762
37,305
67
33
59
980
227
1,207
(19,726)
(228)
33
107
(37)%
96
Collaboration Revenue
Collaboration revenue increased by $16.4 million from $11.4 million for the year ended December 31, 2015 to
$27.8 million for the year ended December 31, 2016. Collaboration revenue for the year ended December 31, 2016 was
related to the former collaboration with Alexion and the existing collaboration with Roche. Collaboration revenue under
our former collaboration with Alexion began in March 2015 upon the execution of the Alexion collaboration agreement,
and we recorded $23.3 million in collaboration revenue for the year ended December 31, 2016. The increase in
collaboration revenue from the year ended December 31, 2015 of $11.9 million under our former collaboration with
Alexion was primarily related to increased reimbursable research and development costs, increased recognition of
portions of the $15.0 million upfront payment and $1.8 million in milestone payments received from Alexion and
increased milestone payments recognized upon achievement during the year ended December 31, 2016. We entered into
the Roche agreement in March 2016 and recorded $4.5 million in collaboration revenue under the Roche collaboration
for the year ended December 31, 2016.
Research and Development Expense
Research and development expense increased by $32.5 million from $48.6 million for the year ended
December 31, 2015 to $81.1 million for the year ended December 31, 2016. The increase in research and development
expense was primarily related to the following:
•
•
•
•
•
approximately $10.3 million in increased expenses for external clinical activities as we advanced two
of our most advanced drug candidates, avapritinib and BLU-554, in Phase 1 clinical trials;
approximately $9.5 million in increased expenses associated with clinical manufacturing activities;
approximately $6.5 million in increased personnel expense primarily due to a 33% increase in
headcount, which was primarily driven by growth in the clinical and nonclinical organizations as we
advanced two of our most advanced drug candidates, avapritinib and BLU-554, in Phase 1 clinical
trials, including an increase in stock-based compensation expense;
approximately $4.4 million in increased expenses associated with continuing to build our discovery
platform and advance our discovery pipeline, including expenses related to the former collaboration
with Alexion; and
approximately $1.8 million in increased expenses associated with IND-enabling pre-clinical
toxicology studies, primarily related to BLU-667 and the former collaboration with Alexion.
General and Administrative Expense
General and administrative expense increased by $4.7 million from $14.5 million for the year ended
December 31, 2015 to $19.2 million for the year ended December 31, 2016. The increase in general and administrative
expense was primarily related to the following:
•
•
approximately $2.7 million in increased personnel expenses primarily due to an increase of 57% in
general and administrative headcount to support our overall growth as a publicly traded company,
including an increase in stock-based compensation expense; and
approximately $1.6 million in increased professional fees, including external legal fees, insurance
premiums and market research expenses.
Other Income (Expense), Net
Other income (expense), net, increased by $1.0 million from $0.4 million of expense for the year ended
December 31, 2015 to $0.6 million of income for the year ended December 31, 2016. The increase in other income
(expense), net, was primarily related to an increase in investment income during the year ended December 31, 2016 due
to our investing in marketable securities beginning in 2016. Also contributing to the increase in other income (expense)
97
was the impact of the re-measurement associated with the change in the fair value of the convertible preferred stock
warrant liability included in the year ended December 31, 2015. Upon the closing of our IPO, all outstanding warrants
exercisable for convertible preferred stock were automatically converted into warrants exercisable for shares of common
stock, and we reclassified the warrants as an equity instrument. Accordingly, there were no related fair value adjustments
in 2016.
Interest Expense
Interest expense decreased by $0.2 million from $0.7 million for the year ended December 31, 2015 to
$0.5 million for the year ended December 31, 2016. The decrease was primarily related to a decrease in the average
outstanding principle balance for the year ended December 31, 2016 under the loan and security agreement with Silicon
Valley Bank. We expect that interest expense will continue to decrease in subsequent periods as the principal amount
under the loan decreases.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through public offerings of our common stock, private
placements of our convertible preferred stock, collaborations and a debt financing.
Through December 31, 2017, we have received an aggregate of $1.1 billion from such transactions, including
$887.4 million in aggregate gross proceeds from the sale of common stock in our May 2015 IPO and December 2016,
April 2017 and December 2017 follow-on public offerings, $115.1 million in gross proceeds from the issuance of
convertible preferred stock, $18.8 million of upfront and milestone payments from Alexion, a $45.0 million upfront
payment from Roche and $10.0 million in gross proceeds from the debt financing. As a result of the termination of the
Alexion agreement, which was effective in October 2017, we will not be entitled to receive payment from Alexion for
any additional milestones.
As of December 31, 2017, we had cash, cash equivalents and investments of $673.4 million.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2017,
2016 and 2015:
(in thousands)
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (119,865) $ (24,513) $ (31,676)
(6,079)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153,222
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 348,235 $ (110,638) $ 115,467
(218,702)
132,577
(75,848)
543,948
2015
2017
Year Ended
December 31,
2016
Net Cash Used in Operating Activities. Net cash used in operating activities was $119.9 million during the year
ended December 31, 2017 compared to net cash used in operating activities of $24.5 million during year ended
December 31, 2016. The increase in net cash used in operating activities was primarily due to an increase in net loss of
$75.6 million for the year end December 31, 2017 as compared to the year ended December 31, 2016 as well as changes
in deferred revenue related to the timing and amount of upfront payments from Roche. In the year ended December 31,
2016, we received a $45.0 million upfront payment from Roche compared to no upfront payments received during the
year ended December 31, 2017.
Net cash used in operating activities was $24.5 million during the year ended December 31, 2016 compared to
net cash used in operating activities of $31.7 million during year ended December 31, 2015. The decrease in net cash
used in operating activities was primarily due to changes in deferred revenue related to the timing and amount of upfront
payments from Alexion and Roche, partially offset by an increase in net loss of $19.7 million for the year end
December 31, 2016 as compared to the year ended December 31, 2015. In the year ended December 31, 2016, we
received a $45.0
98
million upfront payment from Roche, and in the year ended December 31, 2015, we received a $15.0 million upfront
payment from Alexion.
Net Cash Used in Investing Activities. Net cash used in investing activities was $75.8 million during the year
ended December 31, 2017 compared to net cash used in investing activities of $218.7 million during the year ended
December 31, 2016. Net cash used in investing activities for the year ended December 31, 2017 consisted primarily of
purchases of investments, offset by maturities. We classify these investments as available-for-sale and record them at
fair value in the accompanying consolidated balance sheets. Net cash used in investing activities for the year ended
December 31, 2017 also consisted of purchases of property and equipment, mainly related to the relocation of our
headquarters.
Net cash used in investing activities was $218.7 million during the year ended December 31, 2016 compared to
net cash used in investing activities of $6.1 million during the year ended December 31, 2015. Net cash used in investing
activities for the year ended December 31, 2016 consisted primarily of purchases and maturities of investments. We
classify these investments as available-for-sale and record them at fair value in the accompanying condensed
consolidated balance sheets. Net cash used in investing activities for the year ended December 31, 2015 consisted
primarily of purchases of property and equipment.
Net Cash Provided by Financing Activities. Net cash provided by financing activities was $543.9 million during
the year ended December 31, 2017 compared to net cash provided by financing activities of $132.6 million during the
year ended December 31, 2016. Net cash provided by financing activities for the year ended December 31, 2017 was
primarily due to $541.3 million in net proceeds from public offerings of common stock as well as $5.3 million in
proceeds from the issuance of common stock, partially offset by $2.6 million of principal payments on the term loan
payable. Net cash provided by financing activities for the year ended December 31, 2016 was primarily due to
$135.0 million in net proceeds from our December 2016 follow-on underwritten public offering, after deducting
underwriting discounts and commissions and offering expenses payable by us, partially offset by $3.3 million of
principal payments on the term loan payable.
Net cash provided by financing activities was $132.6 million during the year ended December 31, 2016
compared to net cash provided by financing activities of $153.2 million during the year ended December 31, 2015. Net
cash provided by financing activities for the year ended December 31, 2016 was primarily due to $135.0 million in net
proceeds from our December 2016 follow-on underwritten public offering, after deducting underwriting discounts and
commissions and offering expenses payable by us, partially offset by $3.3 million of principal payments on term loan
payable. Net cash provided by financing activities for the year ended December 31, 2015 was primarily due to
$154.8 million of net proceeds from our IPO, after deducting underwriting discounts and commissions and offering
expenses payable by us, partially offset by $1.8 million of principal payments on term loan payable.
Borrowings
In May 2013, we entered into the loan and security agreement with Silicon Valley Bank. Under the terms of the
loan and security agreement, we borrowed $5.0 million. Loan advances under the loan and security agreement accrue
interest at a fixed rate of 2.0% above the prime rate. In November 2014, we amended the loan and security agreement
and borrowed an additional $5.0 million. Each loan advance included an interest-only payment period. During 2014, we
paid principal payments of $0.7 million on the first $3.0 million of advances. During the years ended December 31,
2017, 2016 and 2015, we paid principal payments of $2.6 million, $3.3 million and $1.8 million, respectively, on the
$10.0 million of advances. We are required to pay a fee of 4% of the total loan advances at the end of the term of the
loan. There are no financial covenants associated with the loan and security agreement. As of December 31, 2017, we
had $1.5 million in outstanding principal under the loan and security agreement.
The term loan is collateralized by a blanket lien on all corporate assets, excluding intellectual property, and by a
negative pledge of our intellectual property. The term loan contains covenants, including restrictions on dividends and
default provisions. We have determined that the risk of subjective acceleration under the material adverse events clause
is remote and therefore has classified the outstanding principal in current and long term liabilities based on scheduled
principal payments.
See Note 9, “Term Loan,” in the accompanying notes to our audited consolidated financial statements for
additional information.
99
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the
research and development of, continue and initiate clinical trials of, and seek marketing approval for, our drug
candidates. In addition, if we obtain marketing approval for any of our drug candidates, we expect to incur significant
commercialization expenses related to drug sales, marketing, manufacturing and distribution to the extent that such sales,
marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to continue to
incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial
additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on
attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future
commercialization efforts.
As of December 31, 2017, we had cash, cash equivalents and investments of $673.4 million. Based on our
current plans, we expect that our existing cash, cash equivalents and investments, excluding any potential option fees
and milestone payments under our existing collaboration with Roche, will be sufficient to enable us to fund our
operating expenses and capital expenditure requirements into the middle of 2020. Our future capital requirements will
depend on many factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
the scope, progress, results and costs of drug discovery, pre-clinical development, laboratory testing
and clinical trials for our drug candidates;
the costs of producing drug substance and drug product material for use in pre-clinical studies, clinical
trials and for use as commercial supply;
the scope, prioritization and number of our research and development programs;
the success of our collaboration with Roche;
the success of our current or future companion diagnostic test collaborations, including our companion
diagnostic tests for avapritinib in order to identify GIST patients with the PDGFR(cid:302) D842V mutation,
BLU-554 in order to identify HCC patients with FGFR4 pathway activation and BLU-667 in order to
identify NSCLC patients with RET fusions;
the costs, timing and outcome of regulatory review of our drug candidates;
our ability to establish and maintain collaborations on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under any
collaboration agreements we obtain;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs
under future collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other drug candidates and technologies;
the costs of securing manufacturing arrangements for development activities and commercial
production; and
the costs of establishing or contracting for sales, marketing and distribution capabilities if we obtain
regulatory approvals to market our drug candidates.
Identifying potential drug candidates and conducting pre-clinical studies and clinical trials is a time-consuming,
expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or
100
results required to obtain marketing approval and achieve drug sales. In addition, our drug candidates, if approved, may
not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not
expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional
financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable
terms, or at all.
Until such time, if ever, as we can generate substantial drug revenues, we expect to finance our cash needs
through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing
arrangements. At this time, we do not have any committed external source of funds outside of potential funds to be
earned under our collaboration with Roche. To the extent that we raise additional capital through the sale of equity or
convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities
may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional 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 drug
candidates or to 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, we may be required to delay, limit, reduce or terminate our drug
development or future commercialization efforts or grant rights to develop and market drug candidates that we would
otherwise prefer to develop and market ourselves.
Contractual Obligations
The following table summarizes our significant contractual obligations as of payment due date by period at
December 31, 2017:
Payments Due by Period
(in thousands)
Operating lease commitments (1) . . . $ 112,842 $
Debt repayments (2) . . . . . . . . . . . . . .
Capital lease obligation . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,728 $
Less than 1 Year 1 to 3 Years 3 to 5 Years More than 5 Years
67,542
—
—
67,542
22,095 $
—
—
22,095 $
15,541 $
—
136
15,677 $
7,664 $
1,568
182
9,414 $
1,568
318
Total
(1) Represents future minimum lease payments under our non-cancelable operating leases, net of payments under our sublease for the
office and laboratory space located at 38 Sidney Street, Cambridge, Massachusetts. The minimum lease payments above do not
include any related common area maintenance charges or real estate taxes.
(2) Consists of payment obligations for principal and interest under the loan and security agreement with Silicon Valley Bank. As of
December 31, 2017, we had $1.5 million in outstanding principal under the loan and security agreement with Silicon Valley Bank.
We enter into agreements in the normal course of business with contract research organizations for clinical
trials and clinical supply manufacturing and with vendors for pre-clinical research studies, synthetic chemistry and other
services and products for operating purposes. We have not included these payments in the table of contractual
obligations above since the contracts are generally cancelable at any time by us upon less than 180 days’ prior written
notice. Certain of these agreements require us to pay milestones to such third parties upon achievement of certain
development, regulatory or commercial milestones. Amounts related to contingent milestone payments are not
considered contractual obligations as they are contingent on the successful achievement of certain development,
regulatory approval and commercial milestones, which may not be achieved.
We also have obligations to make future payments to third parties that become due and payable on the
achievement of certain milestones, including future payments to third parties with whom we have entered into
agreements to develop and commercialize companion diagnostic tests for avapritinib in order to identify GIST patients
with the PDGFR(cid:302) D842V mutation, BLU-554 in order to identify HCC patients with FGFR4 pathway activation and
BLU-667 in order to identify NSCLC patients with RET fusions. We have not included these commitments on our
101
balance sheet or in the table above because the achievement and timing of these milestones is not fixed and
determinable.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any off-balance sheet
arrangements, as defined under applicable SEC rules.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As of December 31, 2017 and 2016, we had cash, cash equivalents and investments of $673.4 million and
$268.2 million, respectively, consisting primarily of money market funds and investments in U.S. treasury obligations.
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 in short-term marketable securities. Due to the short-term
duration of our investment portfolio and the low risk profile of our investments, we believe an immediate 10% change in
interest rates would not have a material effect on the fair market value of our investment portfolio. We have the ability to
hold our investments until maturity, and therefore, we would not expect our operating results or cash flows to be affected
to any significant degree by the effect of a change in market interest rates on our investment portfolio.
We are also exposed to market risk related to changes in foreign currency exchange rates. From time to time,
we contract with vendors that are located Asia and Europe, which 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, 2017 and December 31, 2016, we had minimal or no liabilities
denominated in foreign currencies.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that
inflation had a material effect on our business, financial condition or results of operations during the years ended
December 31, 2017 and 2016.
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 of this Annual Report on Form 10-K.
Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required
to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and
(2) accumulated and communicated to our management, including our principal executive and principal financial officer,
as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their
objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of
achieving their control objectives.
Our management, with the participation of our Chief Executive Officer and Vice President of Finance (our
principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2017. Based upon such evaluation, our Chief Executive Officer and Vice
102
President of Finance have concluded that, as of December 31, 2017, our disclosure controls and procedures were
effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act
as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial
officer, or persons performing similar functions, and effected by a company’s 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 generally accepted accounting principles and includes those policies
and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of a company’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that a
company’s receipts and expenditures are being made only in accordance with authorizations of the
company’s 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 the financial statements.
Because of its inherent limitations, 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.
Under the supervision of and with the participation of our principal executive officer and principal financial
officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2017 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control — Integrated Framework (2013 framework). Based on this assessment, management concluded that our
internal control over financial reporting was effective as of December 31, 2017.
Our independent registered public accounting firm has issued an attestation report of our internal control over
financial reporting. This report appears below.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders Blueprint Medicines Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Blueprint Medicines Corporation’s internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion,
Blueprint Medicines Corporation (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of Blueprint Medicines Corporation as of December 31, 2017
and 2016, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and
stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017, and the
related notes and our report dated February 21, 2018 expressed an unqualified opinion thereon.
103
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
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 (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 21, 2018
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) occurred during the three months ended December 31, 2017 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
104
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
SEC with respect to our 2018 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 2018 Annual Meeting of Stockholders and 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 2018 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 2018 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting 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 2018 Annual Meeting of Stockholders and is incorporated herein by reference.
105
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial Statements
PART IV
The following documents are included on pages F-1 through F-28 attached hereto and are filed as part of this
Annual Report on Form 10-K.
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
F-3
F-4
F-5
F-6
F-7
(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
Exhibit
Number
3.1
Description of Exhibit
Fifth Amended and Restated Certificate of
Incorporation of the Registrant
Incorporated by Reference
Form
10-Q
File No.
001-37359
Exhibit
Number
3.1
Filing Date
November 9, 2015
3.2
4.1
4.2
10.1
10.2
Amended and Restated Bylaws of the Registrant
10-Q
001-37359
3.2
November 9, 2015
Specimen Common Stock Certificate
S-1/A
Second Amended and Restated Investors’ Rights
Agreement, dated as of November 7, 2014, by and
among the Registrant and the Investors listed therein
2011 Stock Option and Grant Plan, as amended, and
forms of award agreements thereunder
S-1
S-1
333-
202938
333-
202938
333-
202938
4.1
April 20, 2015
4.4
March 23, 2015
10.1
March 23, 2015
2015 Stock Option and Incentive Plan and forms of
award agreements thereunder
10-K
001-37359
10.2
March 11, 2016
10.3
2015 Employee Stock Purchase Plan
10.4
10.5
10.6
10.7#
10.8#
Lease Agreement, dated February 11, 2015, by and
between the Registrant and 38 Sidney Street Limited
Partnership
First Amendment to Lease Agreement, dated
January 26, 2018, by and between the Registrant and
38 Sidney Street Limited Partnership
Lease Agreement, dated April 28, 2017, by and
between the Registrant and UP 45/75 Sidney Street,
LLC
Employment Agreement, dated November 6, 2015,
by and between the Registrant and Jeffrey W. Albers
Employment Agreement, dated November 6, 2015,
by and between the Registrant and Anthony L. Boral
S-8
S-1
333-
203749
333-
202938
99.3
April 30, 2015
10.4
March 23, 2015
*
10-Q
001-37359
10.1
May 3, 2017
10-Q
001-37359
10.2
November 9, 2015
10-Q
001-37359
10.4
November 9, 2015
106
Incorporated by Reference
Exhibit
Number
10.9#
Description of Exhibit
Employment Agreement, dated March 10, 2016, by
and between the Registrant and Kathryn Haviland
Form
10-K
File No.
001-37359
Exhibit
Number
10.9
Filing Date
March 11, 2016
10.10#
10.11#
10.12#
10.13#
10.14
10.15†
10.16†
10.17
10.18
10.19
Employment Agreement, dated September 6, 2016,
by and between the Registrant and Tracey L.
McCain
Employment Agreement, dated November 9, 2016,
by and between the Registrant and Marion Dorsch
Employment Agreement, dated October 10, 2017, by
and between the Registrant and Christopher Murray
Employment Agreement, dated November 22, 2017,
by and between the Registrant and Michael
Landsittel
Loan and Security Agreement, dated May 24, 2013,
by and between the Registrant and Silicon Valley
Bank, as amended by First Amendment, dated
January 21, 2014, Second Amendment, dated June
27, 2014, Third Amendment, dated November 4,
2014 and Consent and Fourth Amendment, dated
December 22, 2015
10-Q
001-37359
10.3
8-K
001-37359
10.1
November 10,
2016
November 14,
2016
10-Q
001-37359
10.1
October 31, 2017
8-K
001-37359
10.1
November 22,
2017
10-K
001-37359 10.11 March 11, 2016
Collaboration and License Agreement, effective
March 14, 2016, by and among F. Hoffmann-La
Roche Ltd, Hoffmann-La Roche Inc. and the
Registrant, as amended by Amendment to
Collaboration and License Agreement, effective
April 15, 2016
Second Amendment to Collaboration and License
Agreement, effective April 27, 2016, by and among
F. Hoffmann-La Roche Ltd, Hoffmann-La Roche
Inc. and the Registrant
Third Amendment to Collaboration and License
Agreement, effective August 4, 2016, by and among
F. Hoffmann-La Roche Ltd, Hoffmann-La Roche
Inc. and the Registrant
10-Q/A 001-37359
10.2
July 22, 2016
10-Q
001-37359
10.1
August 9, 2016
10-Q
001-37359
10.1
November 10,
2016
Form of Indemnification Agreement entered into
between the Registrant and its directors
Form of Indemnification Agreement entered into
between the Registrant and its officers
S-1
S-1
333-
202938
333-
202938
10.11 March 23, 2015
10.12 March 23, 2015
10.20
Senior Executive Cash Incentive Bonus Plan
10-K
001-37359 10.15 March 11, 2016
21.1
23.1
31.1
Subsidiaries of the Registrant
Consent of Ernst & Young LLP
Certification of Principal Executive Officer pursuant
to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange
Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
*
*
*
107
Exhibit
Number
31.2
Description of Exhibit
Certification of Principal Financial Officer pursuant
to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange
Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Form
File No.
Exhibit
Number
Filing Date
*
Incorporated by Reference
32.1
Certifications of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C.
Section 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 Extension Calculation Linkbase
Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB
XBRL Taxonomy Extension Label Linkbase
Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Document
+
*
*
*
*
*
*
#
†
*
+
Indicates management contract or compensatory plan or arrangement.
Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities
and Exchange Commission.
Filed herewith.
The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Annual Report on Form 10-K and will not be
deemed to be “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by
reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates
it by reference.
Item 16. Form 10-K Summary.
Not applicable.
108
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
Date: February 21, 2018
BLUEPRINT MEDICINES CORPORATION
By:
/s/ Jeffrey W. Albers
Jeffrey W. Albers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Jeffrey W. Albers
Jeffrey W. Albers
/s/ Michael Landsittel
Michael Landsittel
/s/ Daniel S. Lynch
Daniel S. Lynch
/s/ Nicholas Lydon
Nicholas Lydon, Ph.D.
/s/ Alexis Borisy
Alexis Borisy
/s/ Mark Goldberg
Mark Goldberg, M.D.
/s/ Charles A. Rowland, Jr.
Charles A. Rowland, Jr.
/s/ George Demetri
George Demetri, M.D.
/s/ Lonnel Coats
Lonnel Coats
/s/ Lynn Seely
Lynn Seely, M.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 21, 2018
Vice President of Finance
(Principal Financial and Accounting Officer)
February 21, 2018
Chairman of the Board
February 21, 2018
February 21, 2018
February 21, 2018
February 21, 2018
February 21, 2018
February 21, 2018
February 21, 2018
February 21, 2018
Director
Director
Director
Director
Director
Director
Director
109
Blueprint Medicines Corporation
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Blueprint Medicines Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Blueprint Medicines Corporation as of December 31,
2017 and 2016, the related consolidated statements of operations and comprehensive loss, convertible preferred stock
and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017, and
the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017
and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report February 21, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
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 audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the 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
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 financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2011.
Boston, Massachusetts
February 21, 2018
F-2
Blueprint Medicines Corporation
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of lease incentive obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of term loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease incentive obligation, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan payable, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding . . . . . . . . . . .
Common stock, $0.001 par value; 120,000,000 shares authorized; 43,577,526 and 33,125,479 shares issued at
December 31, 2017 and December 31, 2016, respectively; 43,577,526 and 33,123,354 shares outstanding at
December 31, 2017 and December 31, 2016, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, December 31,
2017
2016
$
$
400,304
273,052
—
12,149
685,505
—
24,363
4,555
1,314
715,737
$
$
52,069
162,090
3,577
2,689
220,425
54,059
6,188
1,267
856
282,795
3,744
30,541
5,373
1,714
1,518
42,890
4,129
30,000
14,617
—
131
2,211
11,746
11,426
578
2,551
28,512
932
35,809
2,792
1,518
154
—
—
43
979,785
(269)
(355,589)
623,970
715,737
33
420,533
(18)
(207,470)
213,078
282,795
$
$
F-3
Blueprint Medicines Corporation
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
Collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating expenses:
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Year Ended
December 31,
2016
2017
21,426 $ 27,772
2015
$ 11,400
144,687
27,986
172,673
81,131
19,218
100,349
48,588
14,456
63,044
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
551
(469)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (148,119) $ (72,495)
Other comprehensive loss:
3,349
(221)
3,128
Unrealized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18)
Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (148,370) $ (72,513)
Reconciliation of net loss applicable to common stockholders:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss applicable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss per share applicable to common stockholders — basic and diluted . . . . $
Weighted-average number of common shares used in net loss per share
applicable to common stockholders — basic and diluted . . . . . . . . . . . . . . . . . . .
(72,495)
—
(72,495)
(2.64)
(148,119)
—
(148,119)
(3.92) $
37,793
27,492
(251)
(429)
(696)
(1,125)
$ (52,769)
—
$ (52,769)
(52,769)
(3,153)
(55,922)
(3.07)
$
18,236
F-4
Blueprint Medicines Corporation
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except per share data)
Series A
Convertible
Preferred Stock
Series B
Convertible
Preferred Stock
Series C
Convertible
Preferred Stock
Shares
Amount
40,000,000 $ 39,958
Shares
Amount
20,916,663 $ 24,985
Shares
24,154,589
Amount
49,868
Common Stock
Shares
Additional
Paid-in
Amount Capital
2 $
2,822 $
1,626,738 $
Accumulated
Other
Comprehensive Accumulated
Loss
Deficit
Stockholders’
(Deficit)
Equity
(40,000,000)
—
—
(39,958)
—
—
(20,916,663)
—
—
(24,985)
—
—
(24,154,589)
—
—
(49,868)
—
—
15,467,479
9,367,708
—
15
9
—
114,792
154,743
810
—
32,438
—
571,195
—
—
—
—
— 27,065,558 $
5,750,000
—
284,471
—
23,325
—
—
—
—
—
1
580
—
5,180
—
—
27 $ 278,927 $
134,543
546
377
6,140
6
—
—
—
—
—
—
—
— 33,123,354 $
10,009,259
—
428,210
—
16,703
—
—
—
—
—
—
—
33 $ 420,533 $
541,366
10
4,887
—
476
—
12,523
—
— $
(82,206) $
(79,382)
—
—
—
—
—
—
—
— $
—
—
—
—
(18)
—
(18) $
—
—
—
—
—
—
—
—
—
—
(52,769)
(134,975) $
—
—
—
—
—
(72,495)
(207,470) $
—
—
—
—
114,807
154,752
810
—
581
5,180
(52,769)
143,979
134,549
546
377
6,140
(18)
(72,495)
213,078
541,376
4,887
476
12,523
—
—
—
—
— 43,577,526 $
—
—
—
—
43 $ 979,785 $
(251)
—
(269) $
—
(148,119)
(355,589) $
(251)
(148,119)
623,970
Balance at December 31, 2014 . . . . . . . . . . . . . .
Conversion of preferred stock into common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial public offering, net of issuance costs . . . . . .
Reclassification of warrant . . . . . . . . . . . . . . . .
Issuance of common stock upon warrant
exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock under stock plan . . . . .
Stock based compensation expense . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . .
Follow on offering, net of issuance costs . . . . . . .
Issuance of common stock under stock plan . . . . .
Purchase of common stock under ESPP . . . . . . . .
Stock-based compensation expense . . . . . . . . . . .
Unrealized loss on available-for-sale securities,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2016 . . . . . . . . . . . . . .
Follow on offering, net of issuance costs . . . . . . .
Issuance of common stock under stock plan . . . . .
Purchase of common stock under ESPP . . . . . . . .
Stock-based compensation expense . . . . . . . . . . .
Unrealized loss on available-for-sale securities,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2017 . . . . . . . . . . . . . .
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
F-5
Blueprint Medicines Corporation
Consolidated Statements of Cash Flows
(in thousands)
Operating activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrant liability . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of premiums and discounts on investments. . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Principal payments on loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from public offerings of common stock, net of commissions
and underwriting discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock, net of repurchases . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Supplemental cash flow information
Public offering costs incurred but unpaid at period end . . . . . . . . . . . . . . . . . $
Property and equipment purchases unpaid at period end . . . . . . . . . . . . . . . . $
Conversion of convertible preferred stock into common stock . . . . . . . . . . .
Reclassification of warrant liability to additional paid-in-capital . . . . . . . . .
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year Ended
December 31,
2016
2017
2015
(148,119) $ (72,495) $ (52,769)
1,578
32
—
12,523
(320)
3,577
(7,266)
(458)
1,532
14,597
(11,861)
14,320
(119,865)
(15,512)
(3,501)
(360,835)
304,000
(75,848)
1,582
73
—
6,140
301
(163)
1,470
(304)
4
5,773
33,594
(488)
(24,513)
(2,354)
119
(264,467)
48,000
(218,702)
(2,583)
(965)
(3,333)
(143)
948
109
445
5,180
—
(3,414)
(1,482)
(552)
1,391
1,956
13,641
2,871
(31,676)
(4,883)
(1,196)
—
—
(6,079)
(1,806)
(2,046)
542,225
5,271
543,948
348,235
52,069
400,304 $
135,125
928
132,577
(110,638)
162,707
52,069
156,815
259
153,222
115,467
47,240
$ 162,707
317 $
3,947 $
—
—
151 $
433
—
—
—
316
$
$
$
—
1,244
114,808
810
452
F-6
Blueprint Medicines Corporation
Notes to Consolidated Financial Statements
1. Nature of Business
Blueprint Medicines Corporation (the Company), a Delaware corporation incorporated on October 14, 2008, is
a biopharmaceutical company focused on developing potentially transformational medicines to improve the lives of
patients with genomically defined cancers and rare diseases. The Company’s approach is to leverage its novel target
discovery engine to systematically and reproducibly identify kinases that are drivers of diseases in genomically defined
patient populations and to craft highly selective and potent drug candidates that may provide significant and durable
clinical responses for patients without adequate treatment options.
The Company is devoting substantially all of its efforts to research and development, initial market
development and raising capital. The Company is subject to a number of risks similar to those of other early stage
companies, including dependence on key individuals; establishing safety and efficacy in clinical trials for its drug
candidates; the need to develop commercially viable drug candidates; competition from other companies, many of which
are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its drug
candidates. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay,
reduce, eliminate or out-license certain of its research and development programs or future commercialization efforts.
On May 5, 2015, the Company completed an initial public offering (IPO) of its common stock, which resulted
in the sale of 9,367,708 shares of its common stock at a price to the public of $18.00 per share, including
1,221,874 shares of common stock sold by the Company pursuant to the exercise in full by the underwriters of their
option to purchase additional shares in connection with the offering. The Company received net proceeds of
$154.8 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company.
On December 13, 2016, the Company closed its underwritten public offering of 5,750,000 shares of its common
stock at a price to the public of $25.00 per share, including 750,000 shares of common stock sold by the Company
pursuant to the exercise in full by the underwriters of their option to purchase additional shares in connection with the
offering. The Company received net proceeds of $134.5 million, after deducting underwriting discounts and
commissions and offering expenses paid by the Company.
On April 4, 2017, the Company closed its underwritten public offering of 5,750,000 shares of its common stock
at a price to the public of $40.00 per share, including 750,000 shares of common stock sold by the Company pursuant to
the exercise in full by the underwriters of their option to purchase additional shares in connection with the offering. The
Company received net proceeds of approximately $215.6 million, after deducting underwriting discounts and
commissions and offering expenses payable by the Company.
On December 15, 2017, the Company closed its underwritten public offering of 4,259,259 shares of its common
stock at a price to the public of $81.00 per share, including 555,555 shares of common stock sold by the Company
pursuant to the exercise in full by the underwriters of their option to purchase additional shares in connection with the
offering. The Company received net proceeds of approximately $325.7 million, after deducting underwriting discounts
and commissions and offering expenses payable by the Company.
As of December 31, 2017, the Company had cash, cash equivalents and investments of $673.4 million. Based
on the Company’s current plans, the Company expects that its existing cash, cash equivalents and investments, excluding
any potential option fees and milestone payments under its existing collaboration with F. Hoffmann-La Roche Ltd and
Hoffmann-La Roche Inc. (collectively, Roche), will be sufficient to enable it to fund its operating expenses and capital
expenditure requirements into the middle of 2020.
F-7
2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation
The audited consolidated financial statements of the Company included herein have been prepared in
accordance with accounting principles generally accepted in the United States (GAAP) as found in the Accounting
Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board
(FASB) and the rules and regulations of the SEC.
The accompanying consolidated financial statements include the accounts of the Company and its wholly
owned subsidiary, Blueprint Medicines Security Corporation, which is a Massachusetts subsidiary created to buy, sell
and hold securities. All intercompany transactions and balances have been eliminated.
Effective April 10, 2015, the Company effected a 1-for-5.5 reverse stock split of the Company’s common stock.
All share and per share amounts in the financial statements and notes thereto have been retroactively adjusted for all
periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par
value of common stock to additional paid-in capital. Due to the underwritten public offerings completed on
December 13, 2016, April 4, 2017, and December 15, 2017, there were significant increases in shares outstanding in the
years ended December 31, 2017 and 2016, which impacts the year-over-year comparability of the Company’s net loss
per share calculations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial
accounting policies and in developing the estimates and assumptions that are used in the preparation of the financial
statements. Management must apply significant judgment in this process. Management’s estimation process often may
yield a range of potentially reasonable estimates and management must select an amount that falls within that range of
reasonable estimates. Estimates are used in the following areas, among others: stock-based compensation expense,
including estimating the fair value of the Company’s common stock prior to the IPO; revenue recognition; the valuation
of liability-classified warrants prior to the IPO; accrued expenses; and income taxes.
Significant Accounting Policies
The Company’s critical accounting policies are those policies that require the most significant judgments and
estimates in the preparation of our financial statements. Management has determined that the Company’s most critical
accounting policies are those relating to revenue recognition, accrued research and development expenses, available-for-
sale investments and stock-based compensation.
Available-for-Sale Investments
The Company classifies marketable securities with a remaining maturity when purchased of greater than three
months as available-for-sale. Marketable securities with a remaining maturity date greater than one year are classified as
non-current. Available-for-sale securities are maintained by an investment manager and may consist of U.S. Treasury
securities and U.S. government agency securities. Available-for-sale securities are carried at fair value with the
unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity until
realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense
over the life of the instrument. Realized gains and losses are determined using the specific identification method and are
included in other income (expense). If any adjustment to fair value reflects a decline in value of the investment, the
Company considers all available evidence to evaluate the extent to which the decline is “other-than-temporary” and, if
so, will mark the investment to market through a charge to the Company’s statement of operations and comprehensive
loss.
F-8
Revenue Recognition
The Company recognizes revenue from license and collaboration agreements in accordance with FASB ASC
Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue is recognized when all of the following criteria are
met:
•
•
•
•
persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered;
the seller’s price to the buyer is fixed or determinable; and
collectability is reasonably assured.
Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the
Company’s balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance
sheet date are classified as deferred revenue, current portion. Amounts not expected to be recognized as revenue within
the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.
When evaluating multiple element arrangements, the Company considers whether the deliverables under the
arrangement represent separate units of accounting. This evaluation requires subjective determinations and requires
management to make judgments about the individual deliverables and whether such deliverables are separable from the
other aspects of the contractual relationship. In determining the units of accounting, management evaluates certain
criteria, including whether the deliverables have standalone value, based on the consideration of the relevant facts and
circumstances for each arrangement. The consideration received is allocated among the separate units of accounting
using the relative selling price method, and the applicable revenue recognition criteria are applied to each of the separate
units. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the
customer on a stand-alone basis and (ii) if the arrangement includes a general right of return relative to the delivered
item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the
Company. In assessing whether an item has stand-alone value, the Company considers factors such as the research,
manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated
expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can use the
deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the
deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered
element(s). The Company’s collaboration agreements with Alexion and Roche do not contain a general right of return
relative to the delivered item(s).
Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting
using the relative selling price method. Then, the applicable revenue recognition criteria in ASC 605-25 are applied to
each of the separate units of accounting in determining the appropriate period and pattern of recognition. The Company
determines the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25.
Accordingly, the Company determines the estimated selling price for units of accounting within each arrangement using
vendor-specific objective evidence (VSOE) of selling price, if available, third-party evidence (TPE) of selling price if
VSOE is not available, or best estimate of selling price (BESP) if neither VSOE nor TPE is available. The Company
typically uses BESP to estimate the selling price, since it generally does not have VSOE or TPE of selling price for its
units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the
BESP for a unit of accounting, the Company considers applicable market conditions and relevant entity-specific factors,
including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The
Company validates the BESP for units of accounting by evaluating whether changes in the key assumptions used to
determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units
of accounting.
In the event that an element of a multiple element arrangement does not represent a separate unit of accounting,
the Company recognizes revenue from the combined element over the period over which it expects to fulfill its
performance obligations or as undelivered items are delivered, as appropriate, if all of the other revenue recognition
criteria in ASC 605-25 are met. If the pattern of performance in which the service is provided to the customer can be
determined and objectively measurable performance measures exist, then the Company recognizes revenue under the
F-9
arrangement using the proportional performance method. If there is no discernible pattern of performance and/or
objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement
on a straight-line basis over the period the Company is expected to complete its performance obligations. Revenue
recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue
earned, as determined using the straight-line method or proportional performance method, as applicable, as of the period
ending date.
The Company’s multiple-element revenue arrangements may include the following:
Exclusive Licenses
The deliverables under the Company’s collaboration agreements may include exclusive licenses to research,
develop, manufacture and commercialize licensed products. To account for this element of an arrangement, management
evaluates whether an exclusive license has stand-alone value from the undelivered elements based on the consideration
of the relevant facts and circumstances of the arrangement, including the research and development capabilities of the
collaboration partner. The Company may recognize the arrangement consideration allocated to licenses upon delivery of
the license if facts and circumstances indicate that the license has stand-alone value from the undelivered elements,
which generally include research and development services. The Company defers arrangement consideration allocated to
licenses if facts and circumstances indicate that the delivered license does not have stand-alone value from the
undelivered elements.
When management believes a license does not have stand-alone value from the other deliverables to be
provided in the arrangement, the Company recognizes revenue attributed to the license on a proportional basis over the
Company’s contractual or estimated performance period, which is typically the term of the Company’s research and
development obligations. If management cannot reasonably estimate when the Company’s performance obligation ends,
then revenue is deferred until management can reasonably estimate when the performance obligation ends. The periods
over which revenue should be recognized are subject to estimates by management and may change over the course of the
research and development and licensing agreement. Such a change could have a material impact on the amount of
revenue the Company records in future periods.
Research and Development Services
The deliverables under the Company’s collaboration agreements may include research and development
services to be performed by the Company on behalf of the partner. Payments or reimbursements resulting from the
Company’s research and development efforts are recognized as the services are performed and presented on a gross basis
because the Company is the principal for such efforts, so long as there is persuasive evidence of an arrangement, the fee
is fixed or determinable, and collection of the related amount is reasonably assured.
Milestone Revenue
The Company’s collaboration agreements may include contingent milestone payments related to specified pre-
clinical milestones, development milestones and sales-based commercial milestones.
At the inception of an arrangement that includes milestone payments, the Company evaluates whether each
milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation
includes an assessment of whether:
•
•
•
the consideration is commensurate with either the Company’s performance to achieve the milestone or
the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from
the Company’s performance to achieve the milestone;
the consideration relates solely to past performance; and
the consideration is reasonable relative to all of the deliverables and payment terms within the
arrangement.
F-10
The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must
be overcome to achieve the respective milestone and the level of effort and investment required to achieve the respective
milestone in making this assessment. There is considerable judgment involved in determining whether a milestone
satisfies all of the criteria required to conclude that a milestone is substantive. Milestones that are not considered
substantive are accounted for as license payments and recognized over the remaining period of performance from the
date of achievement of the milestone. Milestones that are considered substantive will be recognized in their entirety upon
successful accomplishment of the milestone with a cumulative catch up adjustments, assuming all other revenue
recognition criteria are met.
Royalty Revenue.
The Company will recognize royalty revenue in the period of sale of the related product(s), based on the
underlying contract terms, provided that the reported sales are reliably measurable and the Company has no remaining
performance obligations, assuming all other revenue recognition criteria are met.
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 from non-owner sources. Other comprehensive income (loss) consisted
of unrealized gains and losses on investments for the year ended December 31, 2017 and 2016. For the year ended
December 31, 2015, comprehensive loss was equal to net loss.
Research and Development Costs
Expenditures relating to research and development are expensed in the period incurred. Research and
development expenses consist of both internal and external costs associated with the development of the Company’s
selective cancer therapies and building of its discovery platform.
In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for
goods or services that will be received in the future for use in research and development activities. In such
circumstances, the nonrefundable advance payments are deferred and capitalized, even when there is no alternative
future use for the research and development, until related goods or services are provided. In circumstances where
amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
Property and Equipment, Net
Property and equipment consists of lab equipment, furniture and fixtures, computer equipment, software, and
leasehold improvements, all of which is stated at cost. Expenditures for maintenance and repairs are recorded to expense
as incurred, whereas major betterments are capitalized as additions to property and equipment. Depreciation is
recognized over the estimated useful lives of the assets using the straight-line method.
Impairment of Long-Lived Assets
The Company continually evaluates whether events or circumstances have occurred that indicate that the
estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets
may be impaired. The Company has not recognized any impairment charges through December 31, 2017.
Warrants
The Company accounts for warrant instruments that either conditionally or unconditionally obligate the issuer
to transfer assets and liabilities regardless of the timing of the redemption feature or price, even though the underlying
shares may be classified as permanent or temporary equity. These warrants are subject to revaluation at each balance
sheet date, and any changes in fair value are recorded as a component of other income (expense), until the earlier of their
exercise or expiration or the time the warrants no longer conditionally or unconditionally obligate the Company to
transfer assets or liabilities, which occurred upon the IPO, at which time the warrant liability was reclassified to
stockholders’ equity.
F-11
Stock-Based Compensation Expense
The Company expenses the fair value of employee stock awards on a straight-line basis over the
requisite service period, which generally is the vesting period. Prior to 2017, expense was recognized net of estimated
forfeitures and adjusted to reflect actual forfeitures. Effective January 1, 2017, upon adoption of ASU No. 2016-09,
Compensation — Stock Compensation under the modified retrospective approach, the Company recognizes gross stock
compensation expense with actual forfeitures recognized as they occur. Compensation cost for restricted stock awards
issued to employees is measured using the grant date intrinsic value of the award adjusted to reflect actual forfeitures.
The Company estimates the fair value of the options granted to employees at the date of grant using the Black-Scholes
option-pricing model that requires management to apply judgment and make estimates, including:
•
•
•
•
•
expected volatility, which is calculated based on reported volatility data for a representative group of
publicly traded companies for which historical information is available. Prior to April 30, 2015, the
Company was a privately-held company and lacked company-specific historical and implied volatility
information. As such, the Company has used an average of expected volatility based on the volatilities
of a representative group of publicly traded biopharmaceutical companies for a period equal to the
expected term of the option grant. Beginning in the fourth quarter of 2015, the Company began to
include its own volatility into the average calculation. The Company intends to consistently apply this
process using representative companies until a sufficient amount of historical information regarding
the volatility of its own share price becomes available;
risk-free interest rate, which is based on the U.S. Treasury yield curve in effect at the time of grant
commensurate with the expected term assumption;
expected term, which the Company calculates using the simplified method, as prescribed by the
Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, as
the Company has insufficient historical information regarding stock options to provide a basis for an
estimate;
prior to becoming a public company, fair value estimates of the underlying common shares, which
were determined using the option-pricing method (OPM) or a hybrid of the probability-weighted
expected return method and the OPM and were approved by the Company’s board of directors. Upon
becoming a public company, the fair value of the underlying common shares equals the closing price
of the Company’s stock on The Nasdaq Global Select Market on the date of grant; and
dividend yield which is zero based on the fact that the Company never paid cash dividends and does
not expect to pay any cash dividends in the foreseeable future.
Stock-based awards issued to non-employees, including directors for non-board-related services, are accounted
for based on the fair value of such services received or of the intrinsic value of equity instruments issued, whichever is
more reliably measured. These stock-based awards are revalued at each vesting date and period-end. Stock-based awards
subject to service-based vesting conditions are expensed on a straight-line basis over the vesting period.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company’s financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of
the assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse.
A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more
likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax
positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of
uncertain tax positions is based on factors including, but not limited to, changes in the law, the measurement of tax
positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit
activity, and changes in facts or circumstances related to a tax position.
F-12
Concentrations of Credit Risk and Off-Balance-Sheet Risk
The Company has no significant off-balance-sheet risk such as foreign exchange contracts, option contracts, or
other foreign hedging arrangements. Financial instruments that potentially expose the Company to concentrations of
credit risk primarily consist of cash and cash equivalents, investments and accounts receivable.
The Company maintains its cash, cash equivalents and investments in a custodian account at high quality
financial institutions, and consequently, the Company believes that such funds are subject to minimal credit risk.
Accounts receivable represents amounts due from the Company’s collaboration partner. The Company monitors
economic conditions to identify facts or circumstances that may indicate that its accounts receivable is at risk of
collection.
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. The Company’s chief operating decision maker is the
chief executive officer. The Company and the chief operating decision maker view the Company’s operations and
manage its business as one operating segment. The Company operates only in the United States.
New Accounting Pronouncements- Recently Adopted
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (ASU No. 2016-09),
which amends ASC Topic 718, Compensation – Stock Compensation. The new standard identifies areas for
simplification involving several aspects of accounting for share-based payment transactions, including the income tax
consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation
expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows.
The new standard was effective for the Company on January 1, 2017. The Company applied ASU 2016-09 using a
modified retrospective approach and adopted the option to recognize gross stock compensation expense with actual
forfeitures recognized as they occur. Given that the application of the estimated forfeiture rate prior to January 1, 2017
resulted in an insignificant reduction in stock-based compensation expense, the cumulative-effect adjustment to retained
earnings recognized as of January 1, 2017 was not material to the consolidated financial statements. The adoption of
ASU 2016-09 also requires all income tax adjustments to be recognized in the consolidated statements of operations. As
the increase in net deferred tax assets is fully offset by a corresponding increase to the deferred tax asset valuation
allowance, there was no material impact of the adoption of this standard. The amount of deferred tax assets that had not
been previously recognized due to the recognition of excess tax benefits is $1.1 million.
New Accounting Pronouncement
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09),
which supersedes the revenue recognition requirements in ASC 605-25, Multiple-Element Arrangements and most
industry-specific guidance. In addition, the FASB recently issued ASUs 2016-10 and 2016-12, which provide clarifying
amendments to ASU 2014-09. ASU 2014-09 and its related amendments will be effective for the Company for interim
and annual periods beginning after December 15, 2017. The new standard requires that an entity recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
company expects to be entitled in exchange for those goods or services. The update also requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including
significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.
This new guidance will be effective for annual reporting periods (including interim reporting periods within those years)
beginning January 1, 2018. Companies have the option of applying this new guidance retrospectively to each prior
reporting period presented (the full retrospective method) or retrospectively with the cumulative effect of initially
applying this update recognized at the date of initial application (the modified retrospective method). The Company will
adopt the new standard effective January 1, 2018 using the modified retrospective method.
The Company is assessing, but has not yet completed its assessment of the impact of the adoption of this
standard on its consolidated financial statements. Currently, the Company anticipates a potential impact on the revenue
F-13
recognition method used to recognize revenue under its agreement with Roche as well as the recognition of milestone
revenue prior to achievement. The expected impact is further described below. Estimated impacts from the adoption of
this standard could differ upon the final adoption and implementation of the standard.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services,
in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity
performs 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) the entity satisfies a performance obligation. ASC 606 also impacts
certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of
the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
With respect to its collaboration with Roche, the Company currently expects that the pattern of revenue
recognition under step (v) above will differ from the pattern of revenue recognition under ASC 605. Any change in the
timing or pattern of revenue recognition will have a corresponding change to the Company’s deferred revenue balance.
The Company expects the accounting for contingent milestone payments under its collaboration agreements to
change under ASC 606. ASC 606 does not contain guidance specific to milestone payments, thereby requiring
contingent milestone payments to be considered in accordance with the overall model of ASC 606. Revenue from
contingent milestone payments may be recognized earlier under ASC 606 than under ASC 605, based on an assessment
of the probability of achievement of the milestone event and the likelihood of a significant reversal of such milestone
revenue at each reporting date. This assessment may result in the recognition of revenue related to a contingent
milestone payment before the milestone event has been achieved.
ASC 606 requires more robust disclosures than required by previous guidance, including disclosures related to
disaggregation of revenue into appropriate categories, performance obligations, the judgments made in revenue
recognition determinations, adjustments to revenue which relate to activities from previous quarters or years, any
significant reversals of revenue, and costs to obtain or fulfill contracts.
In connection with the adoption of these standards, the Company is implementing several new internal controls,
including controls to monitor the probability of achievement of contingent milestone payments and the pattern of
performance of the performance obligation.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU No. 2016-02), which will change the way
the Company recognizes its leased assets. ASU No. 2016-02 will require organizations that lease assets—referred to as
“lessees”—to recognize on the balance sheet the assets and liabilities representing the rights and obligations created by
those leases. ASU No. 2016-02 will also require disclosures to help investors and other financial statement users better
understand the amount, timing, and uncertainty of cash flows arising from leases. The standard is effective for annual
reporting periods (including interim reporting periods within those years) beginning after December 15, 2018. Early
adoption is permitted. The Company is currently evaluating the methods of adoption allowed by the new standard and
the effect that adoption of the standard is expected to have on the Company’s consolidated financial statements and
related disclosures.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) (ASU No. 2016-15),
which simplifies certain elements of cash flow classification. The new guidance is intended to reduce diversity in
practice in how certain transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for
annual periods beginning after December 15, 2017. The Company does not believe the adoption of ASU No. 2016-15
will have a significant impact on the consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (ASU No. 2016-18). The amendments
in ASU No. 2016-18 require an entity to reconcile and explain the period-over-period change in total cash, cash
equivalents and restricted cash within its statements of cash flows. ASU No. 2016-18 is effective for fiscal years
(including interim reporting periods within those years) beginning after December 15, 2017. Early adoption is permitted.
A reporting entity must apply the amendments in ASU No. 2016-18 using a full retrospective approach. The Company
believes that the adoption of this guidance will not have a significant impact on its consolidated financial statements and
related disclosures.
F-14
In 2016, the FASB issued ASU No. 2016-01 Financial Instruments (ASU No. 2016-01) related to the recording
of financial assets and financial liabilities. Under the amended guidance, equity investments (except those accounted for
under the equity method of accounting or those that result in consolidation of the investee) are to be measured at fair
value with changes in fair value recognized in net income (loss). However, an entity has the option to either measure
equity investments without readily determinable fair values either (i) at fair value or (ii) at cost adjusted for changes in
observable prices minus impairment. Changes in measurement under either alternative will be recognized in net income
(loss). The amended guidance became effective January 1, 2018. As the Company does not currently hold equity
securities, ASU No. 2016-01 will not have an impact on the consolidated financial statements at the adoption date. The
Company may hold equity securities in the future, at which time the Company will apply the provisions of ASU
No. 2016-01 and record changes in the fair value of the equity securities in net income (loss).
3. Cash Equivalents and Investments
Cash equivalents are highly liquid investments that are readily convertible into cash with original maturities of
three months or less when purchased. Investments consist of securities with original maturities greater than 90 days
when purchased. The Company classifies these investments as available-for-sale and records them at fair value in the
accompanying consolidated balance sheets. Unrealized gains or losses are included in accumulated other comprehensive
income (loss). Premiums or discounts from par value are amortized to investment income over the life of the underlying
investment.
Cash equivalents and investments, available-for-sale, consisted of the following at December 31, 2017 and
December 31, 2016 (in thousands):
December 31, 2017
Cash equivalents:
Average
Maturity
Amortized
Cost
Unrealized
Gain
Unrealized
Losses
Fair
Value
Money market funds . . . . . . . . . . . . . . . . . .
$ 400,304 $
—
$
—
$ 400,304
Investments, available-for-sale:
U.S. treasury obligations . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
348 Days
273,321
$ 673,625 $
—
—
(269)
$ (269)
273,052
$ 673,356
December 31, 2016
Cash equivalents:
Average
Maturity
Amortized
Cost
Unrealized
Gain
Unrealized
Losses
Fair
Value
Money market funds . . . . . . . . . . . . . . . . . .
$
52,069 $
—
$
—
$
52,069
Investments, available-for-sale:
U.S. treasury obligations . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
298 Days
216,167
$ 268,236 $
14
14
(32)
(32)
216,149
$ 268,218
$
Although available to be sold to meet operating needs or otherwise, securities are generally held through
maturity. The cost of securities sold is determined based on the specific identification method for purposes of recording
realized gains and losses. During the years ended December 31, 2017 and 2016, there were no realized gains or losses on
sales of investments, and no investments were adjusted for other than temporary declines in fair value.
At December 31, 2017 and 2016, the Company held 37 and 33 securities, respectively, that were in an
unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position for
less than twelve months as of December 31, 2017 and 2016 were $273.1 million and $147.1 million, respectively, and
there were no securities held by the Company in an unrealized loss position for more than twelve months. The Company
has the intent and ability to hold such securities until recovery. The Company determined that there was no material
change in the credit risk of the above investments. As a result, the Company determined it did not hold any investments
with an other-than temporary impairment as of December 31, 2017 and December 31, 2016.
F-15
4. Fair Value of Financial Instruments
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly.
• Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the
assumptions market participants would use in pricing the asset or liability. Financial assets and
liabilities are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement.
Financial instruments measured at fair value as of December 31, 2017, are classified below based on the fair
value hierarchy described above:
Description
Financial Assets
Cash equivalents:
December 31,
2017
Active
Markets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400,304 $ 400,304 $
— $
Investments, available-for-sale:
U.S Treasury obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
273,052
273,052
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 673,356 $ 673,356 $
—
— $
—
—
—
Financial instruments measured at fair value as of December 31, 2016, are classified below based on the fair
value hierarchy described above:
Description
Financial Assets
Cash equivalents:
December 31,
2016
Active
Markets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52,069 $ 52,069 $
— $
Investments, available-for-sale:
U.S Treasury obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
216,149
216,149
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268,218 $ 268,218 $
—
— $
—
—
—
At December 31, 2017 and December 31, 2016, the fair value of the Company’s term loan payable is
determined using current applicable rates for similar instruments as of the balance sheet date. The carrying value of the
Company’s term loan payable approximates fair value because the Company’s interest rate yield approximates current
market rates. The Company’s term loan payable is a Level 3 liability within the fair value hierarchy.
The fair value of the preferred stock warrant liability was determined based on Level 3 inputs and utilizing the
Black-Scholes option pricing model (see Note 10). On May 5, 2015, upon completion of the IPO, the warrants to
purchase preferred stock converted into warrants to purchase common stock and the Company reclassified the fair value
of the warrants as of May 5, 2015 to additional paid-in capital. The following table presents activity in the preferred
stock warrant liability during the year ended December 31, 2015 (in thousands):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Issuance of warrant at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of fair value to additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
365
—
445
(810)
—
Year Ended
December 31,
2015
F-16
5. Restricted Cash
At December 31, 2017 and 2016, $4.8 million and $1.3 million, respectively, of the Company’s cash is
restricted by a bank. As of December 31, 2017 and 2016, $4.6 million and $1.3 million, respectively, of the restricted
cash was included in long-term assets on the Company’s balance sheet related to security deposits for the lease
agreements for the Company’s current and former corporate headquarters.
On April 28, 2017, the Company entered into a lease agreement with UP 45/75 Sidney Street, LLC (Landlord)
for approximately 99,833 rentable square feet of office and laboratory space located at 45 Sidney Street in Cambridge,
Massachusetts. The initial term of the lease agreement commenced on October 1, 2017 and will expire on November 30,
2029. The lease agreement requires the Company to maintain a security deposit with the Landlord in the amount of
$3.5 million, which is included in the long-term restricted cash balance on the Company’s balance sheet as of
December 31, 2017. The security deposit is subject to reduction by up to $1.0 million during the term of the lease
agreement, subject to the satisfaction of specified terms and conditions.
6. Property and Equipment, Net
Property and equipment and related accumulated depreciation are as follows (in thousands):
Lab equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term of lease
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Less: accumulated depreciation and amortization . . . . . . . . . . . . .
Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated
Useful Life
(Years)
5
4
3
December 31,
2017
3,604 $
$
837
624
4,681
263
18,998
29,007
(4,644)
24,363
$
$
December 31,
2016
3,059
784
768
4,673
172
—
9,456
(3,268)
6,188
Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $1.6 million, $1.6 million
and $0.9 million, respectively.
7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
External research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2017
17,880 $
5,765
2,467
197
4,176
56
30,541 $
2016
5,696
4,118
1,697
212
23
—
11,746
December 31, December 31,
8. Collaborations
Roche
In March 2016, the Company entered into a collaboration and license agreement (as amended, Roche
agreement) with Roche for the discovery, development and commercialization of up to five small molecule therapeutics
targeting kinases believed to be important in cancer immunotherapy, as single products or possibly in combination with
F-17
other therapeutics. The parties are currently conducting activities for up to five programs under the collaboration,
including up to two collaboration programs leveraging the Company’s novel target discovery engine and proprietary
compound library to select potential targets.
Under the Roche agreement, Roche is granted up to five option rights to obtain an exclusive license to exploit
products derived from the collaboration programs in the field of cancer immunotherapy. Such option rights are triggered
upon the achievement of Phase 1 proof-of-concept. For up to three of the five collaboration programs, if Roche exercises
its option, Roche will receive worldwide, exclusive commercialization rights for the licensed products. For up to two of
the five collaboration programs, if Roche exercises its option, the Company will retain commercialization rights in the
United States for the licensed products, and Roche will receive commercialization rights outside of the United States for
the licensed products. The Company will also retain worldwide rights to any products for which Roche elects not to
exercise its applicable option.
Prior to Roche’s exercise of an option, the Company will have the lead responsibility for drug discovery and
pre-clinical development of all collaboration programs. In addition, the Company will have the lead responsibility for the
conduct of all Phase 1 clinical trials other than those Phase 1 clinical trials for any product in combination with Roche’s
portfolio of therapeutics, for which Roche will have the right to lead the conduct of such Phase 1 clinical trials. Pursuant
to the Roche agreement, the parties will share the costs of Phase 1 development for each collaboration program. In
addition, Roche will be responsible for post-Phase 1 development costs for each licensed product for which it retains
global commercialization rights, and the Company and Roche will share post-Phase 1 development costs for each
licensed product for which the Company retains commercialization rights in the United States.
Subject to the terms of the Roche agreement, the Company received an upfront cash payment of $45.0 million
and will be eligible to receive up to approximately $965.0 million in contingent option fees and milestone payments
related to specified research, pre-clinical, clinical, regulatory and sales-based milestones. Of the total contingent
payments, up to approximately $215.0 million are for option fees and milestone payments for research, pre-clinical and
clinical development events prior to licensing across all five potential collaboration programs, including contingent
milestone payments for initiation of each of the collaboration programs for which the parties will work together to select
targets (pre-option exercise milestones). In addition, for any licensed product for which Roche retains worldwide
commercialization rights, the Company will be eligible to receive tiered royalties ranging from low double-digits to
high-teens on future net sales of the licensed product. For any licensed product for which the Company retains
commercialization rights in the United States, the Company and Roche will be eligible to receive tiered royalties ranging
from mid-single-digits to low double-digits on future net sales in the other party’s respective territories in which it
commercializes the licensed product. The upfront cash payment and any payments for milestones, option fees and
royalties are non-refundable, non-creditable and not subject to set-off.
The Roche agreement will continue until the date when no royalty or other payment obligations are or will
become due, unless earlier terminated in accordance with the terms of the Roche agreement. Prior to its exercise of its
first option, Roche may terminate the Roche agreement at will, in whole or on a collaboration target-by-collaboration
target basis, upon 120 days’ prior written notice to the Company. Following its exercise of an option, Roche may
terminate the Roche agreement at will, in whole, on a collaboration target-by-collaboration target basis, on a
collaboration program-by-collaboration program basis or, if a licensed product has been commercially sold, on a
country-by-country basis, (i) upon 120 days’ prior written notice if a licensed product has not been commercially sold or
(ii) upon 180 days’ prior written notice if a licensed product has been commercially sold. Either party may terminate the
Roche agreement for the other party’s uncured material breach or insolvency and in certain other circumstances agreed
to by the parties. In certain termination circumstances, the Company is entitled to retain specified licenses to be able to
continue to exploit the licensed products.
The Company determined that there were five deliverables under the Roche collaboration: (i) a non-
transferable, sub-licensable and non-exclusive license to use the Company’s intellectual property and collaboration
compounds to conduct research activities;(ii) conducting research and development activities through Phase 1 clinical
trials under the research plan; (iii) providing pre-clinical and clinical supply of collaboration compounds;
(iv) participation on a joint research committee (JRC) and joint development committee (JDC); and (v) regulatory
responsibilities under Phase 1 clinical trials.
F-18
The Company determined that the license did not have value to Roche on a stand-alone basis due to the
specialized nature of the research activities to be provided by the Company that are not available in the marketplace and
the fact that the license is to perform research and development only. Therefore, the license has limited value without the
performance of the research and development activities and is not separable. The pre-clinical and clinical supply
activities are integral to the performance of the research and development activities and can only be used for the
performance of such activities, and the regulatory responsibilities are dependent on the research and development
activities. The Company determined that the best estimate for the selling price of the JRC and JDC participation was
inconsequential. Accordingly, the Company combined the license, pre-clinical and clinical supply, JRC and JDC
participation and regulatory responsibilities deliverables with the research and development activities, the last item to be
delivered in the arrangement, as one unit of accounting. The Company is recognizing the total allocable arrangement
consideration consisting of the upfront payment of $45.0 million as revenue on a straight-line basis over the Company’s
best estimate of the period it expects to perform research and development activities. The Company expects the services
to be delivered ratably.
The Company evaluated whether the option fees that may be received in connection with the Roche agreement
are substantive. The Company concluded that the option fees were substantive due to the uncertainty around whether the
goals of the collaboration will be achieved, and therefore the options are not a deliverable in the current arrangement. If
Roche elects to exercise the options, the exercises and related contingent deliverables would be accounted for as a
separate arrangement.
The Company evaluated whether the milestones that may be received in connection with the Roche agreement
are substantive milestones. Pre-option exercise milestones, of up to $215.0 million, that are expected to be achieved as a
result of the Company’s efforts during the performance of the research and development activities are considered
substantive and are recognized as revenue upon the achievement of the milestone, assuming all other revenue
recognition criteria are met. The development event milestones are not considered substantive because the Company
does not contribute effort to the achievement of such milestones as they are expected to be achieved after the
performance of the research and development activities. Consideration received with respect to these milestones will be
added to the total arrangement consideration that has been allocated to the identified units of accounting. As a result, that
amount is recognized as revenue ratably over the period starting from the effective date of the agreement to the date that
the Company will complete all of its obligations, with a cumulative catch-up from the effective date through the date of
achievement of the milestone. If the consideration is received after the completion of all of the Company’s obligations,
the amount will be recognized as revenue immediately.
During the years ended December 31, 2017 and 2016, the Company recognized revenue under the Roche
collaboration of $5.2 million and $4.5 million, respectively, which represents a portion of the $45.0 million upfront
payment.
Alexion
In March 2015, the Company entered into a research, development and commercialization agreement (Alexion
agreement) with Alexion to research, develop and commercialize one or more drug candidates targeting the ALK2
kinase for the treatment of fibrodysplasia ossificans progressiva (FOP). On July 26, 2017, the Company received written
notice from Alexion of its election to terminate the Alexion agreement for convenience, and the termination became
effective on October 24, 2017.
Under the terms of the Alexion agreement, the Company and Alexion agreed to collaborate to research, develop
and commercialize one or more drug candidates targeting the ALK2 kinase for the treatment of FOP, which is a rare
genetic disease caused by mutations in the ALK2 gene, ACVR1. Effective upon the termination, the Company’s
exclusivity obligations under the Alexion collaboration terminated, including without limitation, the Company’s
exclusivity obligations with respect to (i) the treatment of FOP, heterotopic ossification or diffuse intrinsic pontine
glioma, (ii) ALK2, including both wild-type and mutated forms, and (iii) certain molecules related to the foregoing. In
addition, the research term and all licenses granted to Alexion terminated, and certain licenses granted by Alexion to the
Company survived and became perpetual, irrevocable and non-terminable.
F-19
Pursuant to the Alexion agreement, the Company was responsible for research and pre-clinical development
activities related to any drug candidates, and Alexion was responsible for all clinical development, manufacturing and
commercialization activities related to any drug candidates. In addition, Alexion was responsible for funding 100% of
the Company’s research and development costs incurred under the research plan, including pass-through costs and a
negotiated yearly rate per full-time equivalent for its employees’ time and their associated overhead expenses. As a
result of the termination of the Alexion agreement, the Company will not be entitled to receive payment from Alexion
for any research and development expenses incurred after the effective date of termination.
Prior to termination, the Company had received an aggregate amount of $18.8 million in upfront and milestone
payments. The Company received a $15.0 million non-refundable upfront payment in March 2015 upon execution of the
Alexion agreement and was eligible to receive over $250.0 million in payments upon the successful achievement of
pre-specified pre-clinical, clinical, regulatory and commercial milestones. Prior to termination, the Company had
received an aggregate amount of $3.8 million in pre-clinical milestone payments. As a result of the termination of the
Alexion agreement, the Company will not be entitled to receive payment from Alexion for any additional milestones.
Prior to termination, Alexion was required to pay the Company tiered royalties, ranging from mid-single to low-double
digit percentages, on a country-by-country and licensed-product-by-licensed product basis, on worldwide net product
sales of licensed products. There were no refund provisions in the Alexion agreement.
The Company determined that there were three deliverables under the former Alexion collaboration: (i) an
exclusive license to research, develop, manufacture and commercialize the licensed products and the compounds in the
field in the territory, (ii) conducting research and development activities under the research plan and (iii) participation on
a joint steering committee (JSC) and joint project team (JPT).
The Company determined that the license did not have value to Alexion on a stand-alone basis due to the
specialized nature of the research services to be provided by the Company that are not available in the marketplace.
Therefore, the deliverables were not separable and, accordingly, the license, undelivered research and development
activities and JSC and JPT participation were a single unit of accounting. When multiple deliverables are accounted for
as a single unit of accounting, the Company bases its revenue recognition model on the final deliverable. Under the
Alexion agreement, the last deliverable to be completed is its research and development activities and participation on
the JSC and JPT, which were expected to be delivered over the same performance period. The Company recognized the
remaining deferred revenue balance related to the upfront payment and non-substantive milestone payment previously
received under the former collaboration with Alexion, utilizing the proportional performance model over the remaining
period of performance, which ended October 24, 2017.
The Company evaluated whether the milestones that it was eligible to receive in connection with the Alexion
agreement were substantive or non-substantive milestones. The Company concluded that the first pre-clinical milestone
payment under the former Alexion collaboration was non-substantive due to the certainty at the date the arrangement
was entered into that the event will be achieved. In the second quarter of 2015, the Company achieved the first pre-
clinical milestone under the former Alexion collaboration and received a $1.8 million payment from Alexion. The
Company recognized revenues from the related milestone payment over the remaining period of performance.
The remaining non-refundable pre-clinical milestones that the Company was eligible to achieve as a result of
the Company’s efforts prior to the termination were considered substantive and would have been recognized as revenue
upon the achievement of the milestone, assuming all other revenue recognition criteria were met. The Company has
recognized and received an aggregate of $2.0 million in substantive milestones through December 31, 2017. Milestones
that were expected to be achieved after the period of substantial involvement were not considered substantive because
the Company did not contribute effort to the achievement of such milestones.
During the year ended December 31, 2017, the Company recognized revenue under the former Alexion
collaboration of $16.2 million, which represents $9.5 million of reimbursable research and development costs, as well as
a portion of the $15.0 million upfront payment and the $1.8 million non-substantive milestone payment previously
received. During the year ended December 31, 2016, the Company recognized revenue under the Alexion agreement of
$23.3 million, which represents $14.6 million of reimbursable research and development costs, $1.8 million in milestone
payments that were recognized upon achievement, as well as a portion of the $15.0 million upfront payment and the
$1.8 million non-substantive milestone payment previously received.
F-20
During the year ended December 31, 2017, the Company received $12.7 million related to reimbursable
research and development costs under the former Alexion collaboration.
9. Term Loan
In May 2013, the Company entered into a loan and security agreement with Silicon Valley Bank (the 2013
Term Loan), which provided for up to $5.0 million in funding, to be made available in three tranches. Loan advances
accrue interest at a fixed rate of 2% above the prime rate. In November 2014, the Company amended the 2013 Term
Loan to allow the Company to borrow an additional $5.0 million (the 2014 Term Loan). The Company accounted for the
amendment as a modification to the existing 2013 Term Loan. The Company immediately drew the additional
$5.0 million under the 2014 Term Loan and was required to make interest-only payments until December 1, 2015, and
consecutive monthly payments of principal, plus accrued interest, over the remaining term through November 2018. The
Company is required to pay a fee of 4% of the total loan advances at the end of the term of each of the 2013 Term Loan
and the 2014 Term Loan. The fee is being accreted to interest expense over the term of the 2013 Term Loan and the
2014 Term Loan. In the event of prepayment, the Company is obligated to pay 1% to 2% of the amount of the
outstanding principal depending upon the timing of the prepayment. There are no financial covenants associated with the
loan and security agreement.
The 2013 Term Loan and 2014 Term Loan are collateralized by a blanket lien on all corporate assets, excluding
intellectual property, and by a negative pledge of the Company’s intellectual property. The term loan contains covenants,
including restrictions on dividends and default provisions. The 2013 Term Loan and 2014 Term Loan contain customary
default provisions that include material adverse events, as defined therein. The Company has determined that the risk of
subjective acceleration under the material adverse events clause is remote and therefore has classified the outstanding
principal in current liabilities based on scheduled principal payments.
The Company assessed all terms and features of the 2013 Term Loan and the 2014 Term Loan in order to
identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed
the economic characteristics and risks of the term loan, including put and call features. The Company determined that all
features of each of the 2013 Term Loan and the 2014 Term Loan are clearly and closely associated with a debt host and
do not require bifurcation as a derivative liability, or the fair value of the feature is immaterial to the Company’s
financial statements. The Company will continue to reassess the features on a quarterly basis to determine if they require
separate accounting.
Scheduled monthly principal payments on the term loan, as of December 31, 2017, are as follows
(in thousands):
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,528
$ 1,528
10. Warrants
In connection with the 2013 Term Loan, the Company issued a warrant to Silicon Valley Bank to purchase
150,000 shares of Series A convertible preferred stock at an exercise price of $1.00 per share (the Series A Warrant). In
connection with the 2014 Term Loan, the Company issued an additional warrant to Silicon Valley Bank to purchase
83,333 shares of Series B convertible preferred stock at an exercise price of $1.20 per share (the Series B Warrant). Both
warrants were exercisable immediately and have a ten-year life.
The Company initially valued the Series A Warrant and the Series B Warrant at issuance and at the balance
sheet dates using the Black-Scholes option pricing model. The significant assumptions used in estimating the fair value
of the warrants include the volatility of the stock underlying the warrant, risk-free interest rate, estimated fair value of
the preferred stock underlying the warrant, and the estimated term of the warrant. The fair value of the preferred stock
underlying the warrants was estimated using the implied value from the common stock valuations on those dates.
In accordance with ASC 480, the characteristics of these warrants and the rights and privileges of the
underlying preferred stock resulted in the classification of these warrants as a liability, and they were re-measured to
the-then current fair value at each balance sheet date through the completion of the IPO. Re-measurement gains or losses
were recorded in other income (expense) in the statements of operations and comprehensive loss. Changes in the fair
F-21
value of the warrants represented a recurring measurement that was classified within Level 3 of the fair value hierarchy
wherein fair value is estimated using significant unobservable inputs. The Company recorded $0.4 million of expense
associated with the change in fair value of the warrants in the year ended December 31, 2015 equal to the change in fair
value of the warrants from December 31, 2014 to May 5, 2015.
Upon completion of the IPO, the Series A Warrant became exercisable for 27,272 shares of the common stock
at an exercise price of $5.50 per share, and the Series B Warrant became exercisable for 15,151 shares of the common
stock at an exercise price of $6.60 per share. On the date of the conversion of the warrants, the Company revalued the
outstanding warrants using the Black-Scholes option pricing model with the following assumptions:
Series A Warrant
May 5,
2015
Series B Warrant
May 5,
2015
Fair value of underlying instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.82 $
91.58 %
8.1
2.06 %
— %
20.82
87.75 %
9.5
2.19 %
— %
The fair value of the warrants at May 5, 2015 was $0.8 million and the Company reclassified the balance to
additional paid-in capital.
On May 13, 2015, Silicon Valley Bank exercised the Series A Warrant and the Series B Warrant pursuant to the
cashless exercise feature of the warrants. In connection with the exercise of the Series A Warrant under the 2013 Term
Loan, the Company issued 21,281 shares of common stock to Silicon Valley Bank. Warrants to purchase 5,991 shares of
common stock were cancelled as payment for the aggregate exercise price of the Series A Warrant to Silicon Valley
Bank. In connection with the exercise of the Series B Warrant under the 2014 Term Loan, the Company issued
11,157 shares of common stock. Warrants to purchase 3,994 shares of common stock were cancelled as payment for the
aggregate exercise price of the Series B Warrant.
The Company recorded a debt discount upon issuance of the warrants, which is being accreted as interest
expense over the remaining term of the loan. The Company recorded interest expense related to the Series A Warrant
and the Series B Warrant of less than $0.1 million in each of the years ended December 31, 2017, 2016 and 2015.
11. Stock Awards
2015 Stock Option and Incentive Plan
In 2015, the Company’s board of directors and stockholders approved the 2015 Stock Option and Incentive
Plan (the 2015 Plan), which replaced the Company’s 2011 Stock Option and Grant Plan, as amended (the 2011 Plan).
The 2015 Plan includes incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock,
restricted stock units, unrestricted stock, performance share awards and cash-based awards. The Company initially
reserved a total of 1,460,084 shares of common stock for the issuance of awards under the 2015 Plan. The 2015 Plan
provides that the number of shares reserved and available for issuance under the 2015 Plan will be cumulatively
increased on January 1 of each calendar year by 4% of the number of shares of common stock issued and outstanding on
the immediately preceding December 31 or such lesser amount as specified by the compensation committee of the board
of directors. For the calendar year beginning January 1, 2017 and 2018, the number of shares reserved for issuance under
the 2015 Plan was increased by 1,325,019 and 1,743,101 shares, respectively. In addition, the total number of shares
reserved for issuance is subject to adjustment in the event of a stock split, stock dividend or other change in our
capitalization. At December 31, 2017, there were 1,769,028 shares available for future grant under the 2015 Plan.
F-22
Awards
Options and restricted stock awards granted by the Company generally vest ratably over four years, with a
one-year cliff for new employee awards, and are exercisable from the date of grant for a period of ten years.
A summary of the Company’s unvested restricted stock and related information follows:
Shares
Weighted-Average
Grant Date
Fair Value
Unvested at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,125 $
(2,125)
—
—
1.25
1.25
—
—
The total fair value of restricted stock that vested during the years ended December 31, 2017, 2016 and 2015
was $0.1 million, $2.7 million and $4.9 million, respectively.
A summary of the Company’s stock option activity and related information follows:
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,972
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(426,085)
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(105,462)
Outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,622,741 $ 11.67
42.62
11.47
30.50
Outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,304,166 $ 22.45
Exercisable at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,432,958 $ 11.63
8.04 $ 174,985
91,389
7.34 $
Weighted- Remaining Aggregate
Intrinsic
Contractual
Average
Life
Exercise
Value(1)
(in thousands)
(in Years)
Price
44,025
8.30 $
Shares
(1)
Intrinsic value represents the amount by which the fair market value as of December 31, 2017 of the underlying
common stock exceeds the exercise price of the option.
The fair value of stock options is estimated on the grant date using the Black-Scholes option-pricing model
based on the following weighted average assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . .
2.07 %
— %
6.0
74.58 %
1.55 %
— %
6.0
75.94 %
1.66 %
— %
6.0
85.43 %
December 31, 2017
December 31, 2016 December 31, 2015
Year Ended
The weighted-average grant date fair value of options granted in the years ended December 31, 2017, 2016 and
2015 was $28.04, $13.06 and $8.55, respectively. The total intrinsic value of options exercised in the years ended
December 31, 2017, 2016 and 2015 was $17.8 million, $3.1 million and $6.8 million, respectively.
F-23
Total stock-based compensation expense recognized for all stock-based compensation awards in the statements
of operations and comprehensive loss is as follows (in thousands):
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,296 $ 2,674
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,466
Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,523 $ 6,140
6,227
Year Ended
December 31,
2016
2017
2015
$ 2,148
3,032
$ 5,180
At December 31, 2017, there was $35.2 million of total unrecognized compensation cost related to non-vested
stock awards, which is expected to be recognized over a weighted-average period of 2.41 years. Due to an operating loss,
the Company does not record tax benefits associated with stock-based compensation or option exercises. Tax benefit will
be recorded when realized.
2015 Employee Stock Purchase Plan
In 2015, the Company’s board of directors and stockholders approved the 2015 Employee Stock Purchase Plan
(the 2015 ESPP), which became effective upon the closing of the IPO in May 2015. The Company initially reserved a
total of 243,347 shares of common stock for issuance under the 2015 ESPP. The 2015 ESPP provides that the number of
shares reserved and available for issuance under the 2015 ESPP will be cumulatively increased on January 1 of each
calendar years by 1% of the number of shares of common stock issued and outstanding on the immediately preceding
December 31 or such lesser amount as specified by the compensation committee of the board of directors. For the
calendar year beginning January 1, 2017 and 2018, the number of shares reserved for issuance under the 2015 ESPP was
increased by 331,254 and 435,775 shares, respectively. The Company issued 16,703 and 23,325 shares under the ESPP
during the years ended December 31, 2017 and 2016, respectively.
12. Net Loss per Share
Basic net loss per share applicable to common stockholders is calculated by dividing net loss applicable to
common stockholders by the weighted average shares outstanding during the period, without consideration for common
stock equivalents. Net loss applicable to common stockholders is calculated by adjusting the net loss of the Company for
cumulative preferred stock dividends. Diluted net loss per share applicable to common stockholders is calculated by
adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the
period. For purposes of the dilutive net loss per share applicable to common stockholders calculation, convertible
preferred stock, warrants, stock options, and unvested restricted stock are considered to be common stock equivalents
but are excluded from the calculation of diluted net loss per share applicable to common stockholders, as their effect
would be anti-dilutive; therefore, basic and diluted net loss per share applicable to common stockholders were the same
for all periods presented as a result of the Company’s net loss.
The following common stock equivalents were excluded from the calculation of diluted net loss per share
applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive
effect:
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,304,166 2,622,741
2,125
Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,304,166 2,624,866
—
Year Ended
December 31,
2016
2017
2015
1,802,802
130,495
1,933,297
The weighted average number of common shares used in net loss per share applicable to common stockholders
on a basic and diluted basis were 37,792,929, 27,491,669 and 18,235,614 for the years ended December 31, 2017, 2016
and 2015, respectively.
F-24
13. Convertible Preferred Stock
Upon the closing of the IPO in May 2015, Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock automatically converted into 15,467,479 shares of common stock. In
addition, upon closing of the IPO, the Company’s board of directors was authorized, without action by the stockholders,
to designate and issue up to an aggregate of 5,000,000 shares of preferred stock in one or more series. The board of
directors can designate the rights, preferences and privileges of the shares of each series and any of its qualifications,
limitations or restrictions.
As of December 31, 2017, no shares of preferred stock were issued or outstanding.
14. Income Taxes
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows for the
years ended December 31, 2017, 2016 and 2015:
Year Ended
December 31,
2016
2017
2015
Federal income tax (benefit) at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.00 % 34.00 % 34.00 %
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal orphan drug credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.49
0.97
6.40
5.40
0.83
(27.58)
(20.54)
(2.74)
1.02
6.63
4.81
(0.78)
—
(42.94)
(3.30)
1.09
0.55
4.72
0.56
—
(37.62)
(0.03)%
— %
— %
The Company had net losses in all periods presented and therefore has not recognized any federal or state
income tax expense.
The Company’s deferred tax assets and liabilities consist of the following:
Deferred tax assets:
Year Ended
December 31,
2016
2017
2015
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Research and development credit carryforwards . . . . . . . . . . . . . . . . . . . . . . .
Orphan drug credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred lease incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
78,829 $ 69,443 $ 48,291
2,829
3,833
5,950
289
5,095
14,574
1,374
2,914
4,660
—
2,627
9,664
1,551
1,324
4,462
331
366
1,142
54,665
85,602
119,281
(1,702)
(1,535)
(4,801)
(39)
(14)
(2)
(52,924)
(84,053)
(114,478)
—
— $
— $
Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax
assets, and has determined that it is more likely than not that the Company will not recognize the benefits of its federal
and state deferred tax assets, and as a result, a valuation allowance of $114.5 million, $84.1 million and $52.9 million
has been established at December 31, 2017, 2016 and 2015, respectively. The change in the valuation allowance was
$30.4 million, $31.1 million and $19.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. The
Company has incurred net operating losses (NOL) since inception. At December 31, 2017, the Company had federal and
state NOL carryforwards of $288.6 million and $288.5 million, respectively, which expire beginning in 2030. As of
F-25
December 31, 2017, the Company had federal and state research and development tax credit carryforwards of
$4.2 million and $2.1 million, respectively, which expire beginning in 2025. As of December 31, 2017, the Company
had federal orphan drug credits of $14.6 million, which expire beginning in 2035 and state investment tax credits of
$0.1 million, which expire beginning in 2018.
The Internal Revenue Code of 1986, as amended (the Code), provides for a limitation of the annual use of net
operating losses and other tax attributes (such as research and development tax credit carryforwards) following certain
ownership changes (as defined by the Code) that could limit the Company’s ability to utilize these carryforwards. At this
time, the Company has not completed a study to assess whether an ownership change under Section 382 of the Code has
occurred, or whether there have been multiple ownership changes since the Company’s formation. The Company may
have experienced ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the
Company’s ability to utilize the aforementioned carryforwards may be limited. In addition, U.S. tax laws limit the time
during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take
full advantage of these carryforwards for federal or state income tax purposes.
Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax
expense in the accompanying statements of operations and comprehensive loss. As of December 31, 2017 and 2016, the
Company has no accrued interest related to uncertain tax positions. In many cases, the Company’s uncertain tax
positions are related to years that remain subject to examination by relevant tax authorities. Since the Company is in a
loss carryforward position, it is generally subject to examination by the U.S. federal, state, and local income tax
authorities for all tax years in which a loss carryforward is available.
For all years through December 31, 2017, the Company generated research credits but has not completed a
study to document the qualified activities. This study may result in an adjustment to the Company’s research and
development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are
being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s
research and development credits, and if an adjustment is required, this adjustment would be offset by an adjustment to
the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations and
comprehensive loss if an adjustment were required.
On December 22, 2017, H.R.1, known as the Tax Cuts and Jobs Act, was enacted. This new law did not have a
significant impact on the Company’s consolidated financial statements for the year ended December 31, 2017 because it
maintains a valuation allowance on the majority of its net operating losses and other deferred tax assets. However, the
reduction of the U.S. federal corporate tax rate from 35% to 21% resulted in increases to the amounts reflected in
“Deferred rate change” in the Company’s tax reconciliation table above for the year ended December 31, 2017 compared
to the years ended December 31, 2016 and 2015. The change in the U.S. federal corporate tax rate, which is effective
January 1, 2018, is also reflected in the Company’s deferred tax table above.
On December 22, 2017, the SEC staff issued SAB 118 to address the application of GAAP in situations when a
registrant does not have the necessary information available, prepared, or analyzed (including computations) in
reasonable detail to complete the accounting for certain income tax effects of H.R.1. The Company has recognized the
provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its
consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these
provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and
assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may
take as a result of H.R.1. The Company will complete the accounting treatment for H.R.1 by December 22, 2018, which
is one year from enactment date of H.R.1.
15. Commitments
On February 12, 2015, the Company entered into a lease for approximately 38,500 rentable square feet of office
and laboratory space in Cambridge, Massachusetts, which the Company gained control over on June 15, 2015, and
occupancy commenced in October 2015. The lease ends on October 31, 2022. The Company has an option to extend the
lease for five additional years. The lease has a total commitment of $17.8 million over the seven year term. The
Company has agreed to pay an initial annual base rent of approximately $2.3 million, which rises periodically until it
reaches approximately $2.8 million. The Company is recording rent expense on a straight-line basis through the end of
the lease term. The Company has recorded deferred rent on the consolidated balance sheet at December 31, 2017,
F-26
accordingly. The lease provides the Company with an allowance for leasehold improvements of $4.3 million. The
Company accounts for leasehold improvement incentives as a reduction to rent expense ratably over the lease term. The
balance from the leasehold improvement incentives is included in lease incentive obligations on the balance sheet. The
lease agreement required the Company to pay a security deposit of $1.3 million, which is recorded in restricted cash on
the Company’s balance sheet.
On April 28, 2017, the Company entered into a lease agreement for approximately 99,833 rentable square feet
of office and laboratory space located at 45 Sidney Street in Cambridge, Massachusetts. The initial term of the lease
agreement commenced on October 1, 2017 and will expire on November 30, 2029. The lease agreement also provides
the Company with an option to extend the lease agreement for two consecutive five-year periods at the then fair market
annual rent, as defined in the lease agreement, as well as a right of first offer with respect to leasing additional space
adjacent to the existing leased premises. During the initial term of the lease agreement, the Company has agreed to pay
an initial annual base rent of approximately $7.7 million, which rises periodically until it reaches approximately
$10.6 million in the last year of the initial term. The Company is recording rent expense on a straight-line basis through
the end of the lease term. The Company has recorded deferred rent on the consolidated balance sheet at December 31,
2017 accordingly. The landlord has also agreed to provide the Company with a tenant improvement allowance of
approximately $14.2 million for improvements to be made to the premises. The Company accounts for leasehold
improvement incentives as a reduction to rent expense ratably over the lease term. The lease agreements required the
Company to pay a security deposit of $3.5 million, which is recorded in restricted cash on the Company’s balance sheet.
The future minimum lease payments at December 31, 2017, are as follows (in thousands):
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,174
10,479
10,794
11,118
10,977
67,541
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,083
The Company records rent expense under its lease agreements on a straight line basis. For the years ended
December 31, 2017, 2016, and 2015, rent expense was $6.3 million, $1.8 million, and $1.8 million, respectively.
16. Defined Contribution Benefit Plan
The Company maintains a 401(k) plan for employees (the 401(k) Plan). The 401(k) Plan is intended to qualify
under Section 401(k) of the Internal Revenue Service Code of 1986, as amended, so that contributions to the 401(k) Plan
by employees or by the Company, and the investment earnings thereon, are not taxable to the employees until withdrawn
from the 401(k) Plan, and so that contributions by the Company, if any, will be deductible by the Company when made.
Under the 401(k) Plan, employees may elect to reduce their current compensation by up to the statutorily prescribed
annual limit and to have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan permits the
Company to make contributions up to the limits allowed by law on behalf of all eligible employees. Effective
September 1, 2015, the Company instituted an employer match of 50% of eligible contributions up to 6% of employee
contributions. For the years ended December 31, 2017, 2016 and 2015, the Company contributed $0.5 million,
$0.4 million and $0.1 million, respectively, to the 401(k) Plan.
17. Selected Quarterly Financial Data (unaudited)
The following table contains selected quarterly financial information for 2017 and 2016. The Company believes
that the following information reflects all normal recurring adjustments necessary for a fair statement of the information
F-27
for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future
period.
March 31, 2017
June 30, 2017
September 30, 2017 December 31, 2017
Three Months Ended
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . $
Total operating expenses . . . . . . . . . . . . . .
Total other income (expense), net . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss per share applicable to common
stockholders — basic and diluted . . . . . . . .
$
(in thousands, except per share data)
5,840
34,170
353
(27,977)
$
$
5,890 $
40,104
802
(33,412) $
8,068 $
46,678
907
(37,703) $
1,628
51,721
1,066
(49,027)
(0.84)
$
(0.86) $
(0.96) $
(1.23)
March 31, 2016
June 30, 2016
September 30, 2016 December 31, 2016
Three Months Ended
Total revenue . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . $
Total other expense, net . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss per share applicable to common
stockholders — basic and diluted . . . . . . . .
$
18. Subsequent Events
(in thousands, except per share data)
6,856 $
22,281
(79)
(15,504)
$
7,065 $
25,961
2
(18,894) $
6,160 $
23,043
49
(16,834) $
7,691
29,064
110
(21,263)
(0.57)
$
(0.70) $
(0.62) $
(0.75)
In the first quarter of 2018, the Company subleased its former corporate headquarters at 38 Sidney Street,
Cambridge, Massachusetts through October 31, 2020. Subject to the terms of the sublease agreement and the master
lease agreement, including a right of recapture by the Company, the sublessee has the option to extend the sublease
through October 31, 2022. The sublease includes a total commitment of $8.2 million over the 32 month term of the
sublease agreement.
F-28
Subsidiaries of the Registrant
Entity
State of Incorporation or Organization
Blueprint Medicines Security Corporation
Massachusetts
Exhibit 21.1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-216573) of Blueprint Medicines Corporation,
(2) Registration Statement (Form S-8 No. 333-203749) pertaining to the 2011 Stock Option and Grant Plan,
2015 Stock Option and Incentive Plan, and 2015 Employee Stock Purchase Plan of Blueprint Medicines
Corporation, and
(3) Registration Statements (Form S-8 Nos. 333-210125 and 333-216575) pertaining to the 2015 Stock Option
and Incentive Plan and 2015 Employee Stock Purchase Plan of Blueprint Medicines Corporation;
of our reports dated February 21, 2018, with respect to the consolidated financial statements of Blueprint Medicines
Corporation and the effectiveness of internal control over financial reporting of Blueprint Medicines Corporation
included in this Annual Report (Form 10-K) of Blueprint Medicines Corporation for the year ended December 31, 2017.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 21, 2018
Exhibit 31.1
I, Jeffrey W. Albers, certify that:
CERTIFICATIONS
1.
2.
I have reviewed this Annual Report on Form 10-K of Blueprint Medicines Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 21, 2018
By: /s/ Jeffrey W. Albers
Jeffrey W. Albers
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Michael Landsittel, certify that:
CERTIFICATIONS
1.
2.
I have reviewed this Annual Report on Form 10-K of Blueprint Medicines Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 21, 2018
By: /s/ Michael Landsittel
Michael Landsittel
Vice President of Finance
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Blueprint Medicines Corporation (the “Company”) for
the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that to
his knowledge:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: February 21, 2018
Date: February 21, 2018
By: /s/ Jeffrey W. Albers
Jeffrey W. Albers
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Michael Landsittel
Michael Landsittel
Vice President of Finance
(Principal Financial and Accounting Officer)
Dear Stockholders
At Blueprint Medicines, we are guided by a singular vision: delivering
transformative, highly selective kinase medicines to people with
genomically defined cancers and rare diseases.
In 2017, we moved closer to realizing this vision for Blueprint Medicines as we demonstrated
solid execution across our clinical and research portfolio. We continued to advance our three
lead clinical candidates in five distinct patient populations, further validating the power of the
Blueprint Medicines platform. Our progress speaks to the strength of our scientific approach
and our ability to design and quickly execute clinical trials that enable rapid proof-of-concept,
as well as the potential for highly selective kinase medicines to radically alter the treatment
landscape for patients with cancer and rare genetic diseases.
At the beginning of 2017, we set out four key areas of focus for the year ahead – progressing
our ongoing Phase 1 clinical trials; defining the clinical and regulatory paths forward for
avapritinib and BLU-554; further maximizing the value of our platform; and continuing to
evaluate business development opportunities. Our accomplishments in 2017 represent
significant progress against these goals.
In the fourth quarter, we presented clinical data from two Phase 1 clinical trials of avapritinib,
in patients with advanced gastrointestinal stromal tumors (GIST) – the NAVIGATOR trial –
and advanced systemic mastocytosis (SM) – the EXPLORER trial. In both diseases, our data
demonstrated remarkable clinical activity, which we believe provides a strong foundation
for continued rapid development of avapritinib in patients with GIST and SM and opens the
potential for avapritinib to be explored in a wide range of other diseases in which subsets
of patients have KIT or PDGFRα mutations.
Earlier in 2017, we announced updated data from our ongoing clinical trial of BLU-554 in
patients with advanced hepatocellular carcinoma (HCC), which showed that BLU-554 may
offer a meaningful new treatment option for patients with FGFR4-driven HCC, for whom
there are no biomarker-targeted therapies currently available.
Executive Leadership
Jeff Albers
Chief Executive Officer and President
Anthony L. Boral, M.D., Ph.D.
Chief Medical Officer
Marion Dorsch, Ph.D.
Chief Scientific Officer
Board of Directors
Daniel Lynch
Chairman, Blueprint Medicines Corporation
Jeff Albers
Chief Executive Officer and President,
Blueprint Medicines Corporation
Alexis Borisy
Partner, Third Rock Ventures
Lonnel Coats
Chief Executive Officer and President,
Lexicon Pharmaceuticals, Inc.
Debbie Durso-Bumpus
Senior Vice President,
Human Resources
Kate Haviland
Chief Business Officer
Mike Landsittel
Vice President, Finance
Christoph Lengauer, Ph.D.
Executive Vice President
Tracey L. McCain, Esq.
Executive Vice President,
Chief Legal and Compliance Officer
Christopher K. Murray, Ph.D.
Senior Vice President, Technical Operations
George D. Demetri, M.D.
Professor of Medicine,
Harvard Medical School,
and Director of the Center
for Sarcoma and Bone Oncology,
Dana-Farber Cancer Institute
Nicholas Lydon, Ph.D.
Co-Founder,
Blueprint Medicines Corporation
Charles A. Rowland, Jr.
Former Chief Executive Officer,
Aurinia Pharmaceuticals Inc.
Mark Goldberg, M.D.
Associate Professor of Medicine,
Harvard Medical School
Lynn Seely, M.D.
Chief Executive Officer and President,
Myovant Sciences, Inc.
Annual Meeting of Stockholders
SEC Form 10-K
Transfer Agent
The 2018 annual meeting of
stockholders will be held on Wednesday,
June 20, 2018 at 3:00 p.m. EDT at
Blueprint Medicines’ headquarters, which
are located at 45 Sidney Street,
Cambridge, MA 02139.
Stock Listing
NASDAQ: BPMC
Independent Auditors
Ernst & Young LLP
A copy of Blueprint Medicines’ 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) 714-6674, emailing
ir@blueprintmedicines.com or
sending a written request to:
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:
Investor Relations
Blueprint Medicines Corporation
45 Sidney Street
Cambridge, MA 02139
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
www-us.computershare.com/contactus
Cautionary Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, statements regarding plans
and timelines for the clinical development of avapritinib, BLU-554, BLU-667 and BLU-782; the potential benefits of Blueprint Medicines’ current and future drug candidates in treating patients; plans
and timelines for regulatory submissions, filings or discussions; plans and timelines for current or future discovery programs; Blueprint Medicines’ future financial performance; expectations
regarding potential milestones in 2018; expectations regarding Blueprint Medicines’ existing cash, cash equivalents and investments; and Blueprint Medicines’ strategy, business plans and focus.
The words “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “target” and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any forward-looking statements in this annual report are based on
management’s current expectations and beliefs and are subject to a number of risks, uncertainties and important factors that may cause actual events or results to differ materially from those
expressed or implied by any forward-looking statements contained in this annual report, including, without limitation, risks and uncertainties related to the delay of any current or planned clinical
trials or the development of Blueprint Medicines’ drug candidates, including avapritinib, BLU-554, BLU-667 and BLU-782; Blueprint Medicines’ advancement of multiple early-stage efforts;
Blueprint Medicines’ ability to successfully demonstrate the safety and efficacy of its drug candidates; the preclinical and clinical results for Blueprint Medicines’ drug candidates, which may not
support further development of such drug candidates; actions of regulatory agencies, which may affect the initiation, timing and progress of clinical trials; Blueprint Medicines’ ability to develop
and commercialize companion diagnostic tests for its current and future drug candidates, including companion diagnostic tests for BLU-554 for FGFR4-driven HCC, avapritinib for PDGFRα
D842V-driven GIST and BLU-667 for RET-driven NSCLC; and the success of Blueprint Medicines’ cancer immunotherapy collaboration with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
These and other risks and uncertainties are described in greater detail in the section entitled “Risk Factors” in Blueprint Medicines’ Annual Report on Form 10-K for the year ended December 31,
2017, as filed with the Securities and Exchange Commission (SEC) on February 21, 2018, and other filings that Blueprint Medicines has made or may make with the SEC in the future. Any
forward-looking statements contained in this annual report represent Blueprint Medicines’ views only as of April 27, 2018 and should not be relied upon as representing its views as of any
subsequent date. Except as required by law, Blueprint Medicines assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes
available in the future.
© Blueprint Medicines Corporation April 27, 2018 Blueprint Medicines Corporation
45 Sidney Street
Cambridge, MA 02139
(617) 374-7580
blueprintmedicines.com
NASDAQ: BPMC
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NASDAQ: BPMC