ANNUAL REPORT 2019
NASDAQ: BPMC
Linnea, living
with non-small
cell lung cancer
Dear Shareholders
I want to begin by acknowledging the challenges we are all facing as a result of the COVID-19
pandemic. This is a difficult time for patients, our industry and our communities. We are deeply
grateful to the healthcare professionals who are working so diligently to reduce the spread of the
outbreak and caring for the patients and families who are affected.
This pandemic has brought to the forefront the critical importance of innovation and highlighted the
ability of the biopharmaceutical industry to act collaboratively and with urgency to deliver new options
– including tests, vaccines and medicines – to accurately diagnose and treat people with serious
diseases. At Blueprint Medicines, we are more committed than ever to the patients and healthcare
providers we serve. We know that patients with life-threatening and debilitating diseases have
persistent medical needs and we will continue to advance our portfolio of precision therapies with
urgency. During this time, we are also providing support to patients receiving our commercial and
investigational medicines and their healthcare providers with individualized solutions that address
local disruptions in healthcare systems and enable continuity of care.
Now Approved
As we face these challenges, the foundation of our company is strong. We are proud of the
tremendous progress we achieved across our portfolio in 2019, which culminated in the approval of
AYVAKIT™ (avapritinib) by the U.S. Food and Drug Administration (FDA) for the treatment of adults
with unresectable or metastatic gastrointestinal stromal tumor (GIST) harboring a PDGFRA exon 18
mutation, including PDGFRA D842V mutations. AYVAKIT is the first precision therapy and only
highly effective FDA-approved treatment for patients with PDGFRA exon 18 mutant GIST,
representing a new standard of care for this genomically defined patient population.
While the approval of our first medicine is a significant milestone, our intention has always been to
develop and deliver a broad portfolio of precision therapies to patients worldwide. We expect to
make tremendous strides towards this vision in 2020, as we complete our transformation into a
fully-integrated, global biopharmaceutical company.
Our efforts in 2020 will center around three key themes: first, we will continue to build our
commercial infrastructure to support additional planned launches of pralsetinib in RET
fusion-positive non-small cell lung cancer and avapritinib in advanced systemic mastocytosis
(SM). We designed our commercial organization to be nimble and scalable in order to maximize
efficiencies, reduce risk around multiple launches and enable a sustainable future as we continue
to invest in promising discovery programs. We believe this approach will
serve us well as we look toward potential launches across these
therapeutic areas in 2020 and 2021.
“We designed our commercial
organization to be nimble and scalable,
in order to maximize efficiencies,
reduce risk around multiple launches
and enable a sustainable future as we
continue to invest in promising
discovery programs.”
Jeff Albers,
President and Chief Executive Officer
Second, we will continue to expand our strategic
focus on systemic mastocytosis (SM) and other
KIT-driven mast cell disorders. There is a tremendous
medical need for people living with SM, a debilitating disease
that affects approximately 75,000 people in major markets. We are
uniquely positioned to address this need with avapritinib, a potent
inhibitor of D816V mutant KIT, the primary genetic driver in nearly all patients with SM. Based
on a strong foundation of clinical data, including an unprecedented overall response rate and
profound reductions in mast cell burden, we plan to submit a supplemental NDA to the FDA for
avapritinib for the treatment of patients with advanced SM in the second half of 2020. Earlier this
year, we reported data from our PIONEER clinical trial, which showed improvements in mast cell
burden, disease symptoms and patient-reported quality of life in patients with indolent SM.
Combined with favorable safety data, these results strongly support our plans to initiate patient screening
in the registration-enabling part 2 of the PIONEER trial later this year. In addition, to further strengthen our
position in SM over the long-term, we recently submitted an investigational new drug application for
BLU-263, our next-generation KIT inhibitor, with the goal of reaching even more patients with indolent SM
and other KIT-driven mast cell disorders.
The third pillar of our 2020 strategy is the continued strengthening of our early-stage pipeline. At our R&D
Day in November 2019, we announced several new research programs which take advantage of our
expanding scientific capabilities and clinical expertise. In addition to BLU-263, we introduced two research
programs targeting well-characterized resistance mutations in patients with EGFR-driven non-small cell
lung cancer and highlighted a research program under our collaboration with Roche, which targets
MAP4K1, a kinase believed to play a critical role in T cell regulation. In 2020, we plan to nominate up to
three development candidates.
Importantly, we have a solid financial foundation and expect our existing cash will be sufficient to fund to
operating plans into the second half of 2022. This will support the continued expansion of our portfolio and
commercial plans through multiple potential regulatory approvals and the recognition of potentially
meaningful product revenue.
As I reflect on the past year and look ahead toward all we hope to accomplish in 2020, I feel incredibly
lucky to lead the Blueprint Medicines team. The capability, persistence and resiliency of our dedicated
employees provide a powerful foundation for us to meet the needs of patients and healthcare providers at
this unique moment and, ultimately, to deliver on the promise of precision medicine for the most
difficult-to-treat diseases.
Jeff Albers
President and Chief Executive Officer
AYVAKIT, Blueprint Medicines and associated logos are trademarks of Blueprint Medicines Corporation.
Patient focus: Living with indolent systemic mastocytosis
For many children, enjoying a piece of candy is just that – enjoyable. When four-year-old Kristine popped a
bright red candy in her mouth, she lost consciousness and woke up minutes later in the emergency room.
This was Kristine’s first of many anaphylactic reactions and the beginning of a life-long journey with the
indolent form of systemic mastocytosis (SM).
SM is a debilitating rare blood disorder caused by the activation
and proliferation of mast cells; a type of white blood cell
involved in the body’s immune system. It affects
approximately 75,000 people in major markets. Nearly
all cases are driven by the KIT D816V mutation, yet
no therapies targeting this mutation are available.
Since Kristine’s first emergency room visit,
she has been hospitalized countless times for
life-threatening anaphylaxis due to unpredictable
triggers like the smell of shellfish or an increase
in stress.
When asked about her journey, Kristine said,
“At one point, I was regularly waking up at 3 a.m.
to vomit, often until I lost consciousness. I was
fearful of completing daily tasks like driving.”
Kristine’s other symptoms included skin itching,
stomach pain, rapid flushing, migraines and bone pain.
Kristine, living
with systemic
mastocytosis
Today, Kristine does her best to live with SM through
maintaining a positive attitude, keeping an EpiPen® close by
and by taking multiple medications designed to manage
symptoms rather than treat the disease. But Kristine hasn’t given up
hope. She says, thanks to researchers at Blueprint Medicines, she is
“optimistic about the future for SM patients and refuses to let this disease win.”
“Though deep scientific knowledge forms the basis of our company, we go beyond intellectual
curiosity to achieve a common goal: to allow patients with genomically defined cancers and
rare diseases to live longer, healthier lives.” — Andy Boral, M.D., Ph.D., Chief Medical Officer
EpiPen is a registered trademark of Mylan Inc.
An expansive pipeline
DISCOVERY
EARLY-STAGE DEVELOPMENT
LATE-STAGE DEVELOPMENT
REGULATORY SUBMISSION
APPROVED
U.S.
MAA
NDA
NDA
NDA/MAA 5
NDA
Avapritinib: KIT & PDGFRA
PDGFRA GIST1,2,3
4L GIST1,2,4
Advanced SM2
Indolent SM2
Pralsetinib: RET
2L RET+ NSCLC1,2
1L RET+ NSCLC1,2
EGFR+ NSCLC (+osimertinib)1,2
2L MTC1,2
1L MTC1,2
Other RET-altered solid tumors1,2
Fisogatinib: FGFR4
Advanced HCC2
Advanced HCC (+CS-1001)2
BLU-263: KIT
Indolent SM
BLU-945: EGFR+ T790M/C797S triple mutant
EGFR+ NSCLC1
Research program: EGFR+ C797S double mutant
EGFR+ NSCLC1
Research programs: 2 undisclosed targets
Research program: MAP4K16
Research programs: 3 undisclosed immunokinase targets6
ongoing or completed
planned
Updated as of April 29, 2020.
1Unresectable or metastatic disease.
2CStone Pharmaceuticals has exclusive rights to develop and commercialize avapritinib, pralsetinib and fisogatinib in Mainland China, Hong Kong, Macau and Taiwan. Blueprint Medicines
retains all rights in the rest of the world.
3Approved in the U.S. for the treatment of adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V mutations. The proposed MAA
indication is unresectable or metastatic GIST harboring a PDGFRA D842V mutation.
4NDA has a PDUFA action date of May 14, 2020. Based on top-line data from the Phase 3 VOYAGER trial, Blueprint Medicines plans to discontinue further development of avapritinib in GIST.
5NDA submitted to FDA in March 2020; plan to submit MAA to EMA in Q2 2020.
6In collaboration with Roche. Blueprint Medicines has U.S. commercial rights for up to two programs. Roche has worldwide commercialization rights for up to two programs and ex-U.S.
commercialization rights for up to two programs.
1L = first-line. 2L = second-line. 4L = fourth-line. GIST = gastrointestinal stromal tumors. HCC = hepatocellular carcinoma. MAA = Marketing Authorization Application. MTC = medullary
thyroid cancer. NDA = New Drug Application. NSCLC = non-small cell lung cancer. SM = systemic mastocytosis.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
(cid:1408)
(cid:1407)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
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
Trading Symbols
BPMC
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:1408) No (cid:1407)
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:1407) No (cid:1408)
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:1408) No (cid:1407)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes (cid:1408) No (cid:1407)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:1408)
Non-accelerated filer (cid:1407)
Accelerated filer (cid:1407)
Smaller reporting company (cid:1407)
Emerging growth company (cid:1407)
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:1407)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407) No (cid:1408)
As of June 28, 2019, 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
$4,627,796,219.
Number of shares of the registrant’s common stock, par value $0.001 per share, outstanding on February 10, 2020: 54,027,009
Portions of the registrant’s definitive proxy statement for its 2020 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, 2019, are
incorporated by reference into Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PART I
Page
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 92
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Change in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . 111
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
90
PART III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
113
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . 113
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
PART IV
Item 1.
Item1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
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 subsidiaries.
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 “aim,”
“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 clinical trials and any planned clinical trials for avapritinib, pralsetinib, fisogatinib and BLU-
263, and our research and development programs;
our ability to advance drug candidates into, and successfully complete, clinical trials;
the timing or likelihood of regulatory actions, filings and approvals for our drug candidates and our
ability to successfully expand the indication for avapritinib, obtain marketing approval for avapritinib
in additional jurisdictions and obtain marketing approval for pralsetinib;
our ability and plans in continuing to build out our commercial infrastructure and successfully
launching, marketing and selling AYVAKIT™ (avapritinib) and any future drug candidate for which
we receive marketing approval in the U.S. and Europe;
the rate and degree of market acceptance of AYVAKIT and any current and future drug candidates for
which we receive marketing approval;
the pricing and reimbursement of AYVAKIT and any future drugs for which we receive marketing
approval;
our ability to successfully develop manufacturing processes for our drug and drug candidates and
secure manufacturing, packaging and labeling arrangements for development activities and
commercial production;
the implementation of our business model and strategic plans for our business, drug and drug
candidates and technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering
our drug, drug candidates and technology;
the potential benefits of our collaborations with F. Hoffmann-La Roche Ltd and Hoffmann-La
Roche Inc. and CStone Pharmaceuticals, as well as our ability to maintain these collaborations and
establish other strategic collaborations;
the potential benefits of our exclusive license agreement with Clementia Pharmaceuticals, Inc.;
the development of a companion diagnostic test for AYVAKIT to identify patients with a PDGFRA
D842V mutation or companion diagnostic tests for our current or future drug candidates;
1
•
•
our financial performance, estimates of our expenses, future revenues, capital requirements and our
needs for future financing; 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
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 precision therapy company focused on genomically defined cancers, rare diseases and cancer
immunotherapy. Our approach is to leverage our novel target discovery engine to systematically and reproducibly
identify kinases that are drivers of diseases and to craft highly selective and potent therapies 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. We believe that our uniquely targeted, scalable approach empowers the rapid design and
development of new treatments and increases the likelihood of success. We have one precision therapy approved by the
U.S. Food and Drug Administration, or FDA, and are currently advancing multiple investigational medicines in clinical
development, along with multiple research programs.
Avapritinib and BLU-263 — Systemic Mastocytosis and other Mast Cell Disorders
Avapritinib
We are developing avapritinib for the treatment of systemic mastocytosis, or SM, 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. Nearly all cases of SM are driven by the KIT
D816V mutation, which aberrantly activates mast cells.
We are currently evaluating avapritinib in an ongoing registration-enabling Phase 1 clinical trial in advanced
SM, which we refer to as our EXPLORER trial, an ongoing registration-enabling Phase 2 clinical trial in advanced SM,
which we refer to as our PATHFINDER trial, and an ongoing registration-enabling Phase 2 clinical trial in indolent and
smoldering SM, which we refer to as our PIONEER trial. We plan to present updated data from the EXPLORER and
PATHFINDER trials in the second half of 2020. In December 2019, we reported initial data from the dose-finding
portion (part 1) of the PIONEER trial at the 61st American Society of Hematology Annual Meeting and Exposition, or
ASH annual meeting. We plan to report updated data from part 1 of the PIONEER trial in a late-breaking oral
presentation on March 14, 2020 at the annual meeting for the American Academy of Allergy, Asthma & Immunology, or
AAAAI annual meeting. Based on these data, we expect to initiate patient screening in part 2 of the PIONEER trial in
the second quarter of 2020 and complete enrollment by the end of 2020.
We plan to submit a supplemental new drug application, or NDA, to the FDA for avapritinib for the treatment
of advanced SM in the second half of 2020, which we anticipate will be focused on data from patients in the
EXPLORER and PATHFINDER trials who were treated with avapritinib at a starting dose of 200 mg once daily, or QD,
supported by pooled data from all doses. The FDA has granted orphan drug designation to avapritinib for the treatment
of mastocytosis, and the European Commission has granted orphan medicinal product designation to avapritinib for the
treatment of mastocytosis. In addition, the FDA has granted breakthrough therapy designation to avapritinib for the
treatment of advanced SM, including the subtypes of aggressive SM, SM with an associated hematologic neoplasm and
mast cell leukemia.
BLU-263
We are developing BLU-263 for the treatment of indolent SM and other mast cell disorders. BLU-263 is an
investigational, orally available, potent and highly selective KIT inhibitor currently in the discovery stage. BLU-263 is
designed to have equivalent potency as avapritinib, improved selectivity for KIT, with low off-target activity, and lower
penetration of the central nervous system relative to avapritinib based on preclinical data, which we believe will enable
development of BLU-263 in a broad population of patients with indolent SM, including patients with lower disease
burden requiring potentially life-long chronic therapy, as well as patients with other KIT-driven mast cell disorders. We
plan to submit an investigational new drug application, or IND, for BLU-263 for indolent SM and initiate a Phase 1 trial
in healthy volunteers in the first half of 2020.
3
Pralsetinib — RET-altered Cancers
We are developing pralsetinib for the treatment of RET-altered non-small cell lung cancer, or NSCLC,
medullary thyroid carcinoma, or MTC, and other solid tumors. Pralsetinib is an investigational, orally available, potent
and highly selective inhibitor that targets RET, a receptor tyrosine kinase. Pralsetinib is designed to inhibit the activating
RET fusions and mutations that drive cancer growth and remain active in the presence of resistance mutations that we
predict will arise from treatment with first generation therapies. RET activating fusions and mutations drive disease in
subsets of patients with NSCLC, and cancers of the thyroid, including MTC and papillary thyroid cancer, or PTC, and
our research suggests that RET may drive disease in subsets of patients with colon cancer, breast cancer, pancreatic
cancer and other cancers.
We are currently evaluating pralsetinib in an ongoing registration-enabling Phase 1/2 clinical trial in patients
with RET-altered NSCLC, MTC and other advanced solid tumors, which we refer to as our ARROW trial. In
January 2020, we reported top-line data from the ARROW trial in RET fusion-positive NSCLC patients treated with
pralsetinib at 400 mg QD. We plan to report top-line data from the ARROW trial in RET-mutant MTC patients in the
second quarter of 2020. In addition, we plan to present the registration data from the ARROW trial of pralsetinib in RET
fusion-positive NSCLC and RET-mutant MTC in 2020. We recently announced the activation of the first trial site for
our Phase 3 clinical trial evaluating pralsetinib in patients with first-line RET fusion-positive NSCLC, which we refer to
as our AcceleRET Lung trial, and we plan to initiate a Phase 3 clinical trial of pralsetinib in first-line RET-mutant MTC
in the second half of 2020.
In January 2020, we initiated the submission of a rolling NDA to the FDA for the treatment of patients with
RET fusion-positive NSCLC, and we expect to complete the submission in the first quarter of 2020. We plan to submit
an NDA to the FDA for pralsetinib for the treatment of patients with MTC previously treated with an approved multi-
kinase inhibitor in the second quarter of 2020. In addition, we plan to submit a marketing authorization application, or
MAA, to the European Medicines Agency, or EMA, for pralsetinib for RET fusion-positive NSCLC in the second
quarter of 2020.
The FDA has granted orphan drug designation to pralsetinib for the treatment of RET-rearranged NSCLC,
JAK1/2-positive NSCLC or TRKC-positive NSCLC, and the FDA has granted breakthrough therapy designation to
pralsetinib for the treatment of patients with RET-fusion positive NSCLC that has progressed following platinum-based
chemotherapy and to pralsetinib for the treatment of patients with RET mutation-positive MTC that requires systemic
treatment and for which there are no acceptable alternative treatments.
Avapritinib — Gastrointestinal Stromal Tumors
We are also developing avapritinib for the treatment of gastrointestinal stromal tumors, or GIST, a rare disease
that is a sarcoma, or tumor of bone or connective tissue, of the gastrointestinal, or GI, tract. Avapritinib is an orally
available, potent and highly selective inhibitor that targets KIT and PDGFRA mutations. These mutations abnormally
activate receptor tyrosine kinases that are drivers of GIST.
In January 2020, the FDA granted approval of avapritinib under the brand name AYVAKIT for the treatment of
adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations. The efficacy of AYVAKIT was established from 43 patients in the NAVIGATOR trial with unresectable or
metastatic GIST harboring PDGFRA exon 18 mutations, including 38 patients with PDGFRA D842V mutations. The
safety of AYVAKIT in patients with unresectable or metastatic GIST was evaluated in 204 patients who received 300
mg QD or 400 mg QD dosing in the NAVIGATOR trial.
We are also developing avapritinib for the treatment of third-line and later GIST (including fourth-line GIST).
We are currently evaluating avapritinib for the treatment of GIST in an ongoing registration-enabling global, randomized
Phase 3 clinical trial comparing avapritinib to regorafenib in third-line GIST, which we refer to as our VOYAGER trial.
The FDA is currently reviewing our NDA for avapritinib for the treatment of fourth-line GIST, and this application has a
Prescription Drug User Fee Act, or PDUFA, action date of May 14, 2020. As part of the review, the FDA has requested
top-line data from our VOYAGER trial. We expect to provide the top-line data to the FDA early in the second quarter of
2020 to enable the FDA to take action by the PDUFA action date and we also expect to report the top-line data in the
second quarter of 2020.
4
Based on data from the VOYAGER trial, we plan to submit a supplemental NDA to the FDA for avapritinib for
the treatment of third-line GIST in the second half of 2020. In addition, the EMA is currently reviewing our MAA for
the treatment of adult patients with PDGFRA D842V mutant GIST, regardless of prior therapy, and we anticipate a
decision from the European Commission in the third quarter of 2020. We plan to pursue an MAA for third-line and later
GIST (including fourth-line GIST) based on data from our VOYAGER trial.
The FDA has granted breakthrough therapy designation to avapritinib for the treatment of patients with
unresectable or metastatic GIST harboring the PDGFRA D842V mutation. The FDA has also granted orphan drug
designation to avapritinib for the treatment of GIST and fast track designation to avapritinib for (i) the treatment of
patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a second tyrosine
kinase inhibitor and (ii) the treatment of patients with unresectable or metastatic GIST with the PDGFRA D842V
mutation regardless of prior therapy. In addition, the European Commission has granted orphan medicinal product
designation to avapritinib for the treatment of GIST.
Fisogatinib — Hepatocellular Carcinoma
We are developing fisogatinib for the treatment of advanced hepatocellular carcinoma, or HCC. Fisogatinib is
an investigational, orally available, potent and highly selective inhibitor that targets FGFR4, a kinase that is aberrantly
activated in a defined subset of patients with HCC, the most common type of liver cancer. We are currently evaluating
fisogatinib in an ongoing Phase 1 clinical trial in patients with advanced HCC. As part of our collaboration with CStone
Pharmaceuticals, or CStone, we are also evaluating fisogatinib in combination with CS1001, a clinical-stage anti-PDL1
immunotherapy being developed by CStone, for the treatment of locally advanced or metastatic HCC in an ongoing
Phase 1b/2 trial conducted in multiple clinical sites in China. The FDA has granted orphan drug designation to
fisogatinib for the treatment of HCC.
Discovery Platform
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. In January 2020, we announced the nomination of a development candidate for the treatment of
EGFR Exon 19/L858R+T790M+C797S, which we refer to as resistant EGFR-positive triple mutant NSCLC. Following
this nomination, we currently have five wholly-owned discovery programs, consisting of the following: BLU-263; the
development candidate for the treatment of resistant EGFR-positive triple mutant NSCLC; a pre-development candidate
program targeting EGFR Exon 19/L858R+C797S, which we refer to as resistant EGFR-positive double mutant NSCLC;
and two pre-development candidate programs for undisclosed kinase targets. EGFR Exon 19/L858R+T790M+C797S
and EGFR Exon 19/L858R+C797S are acquired resistance mutations in NSCLC patients following treatment with
osimertinib. We plan to nominate up to two additional development candidates by the end of 2020.
Development and Commercialization Rights
We currently have worldwide development and commercialization rights to avapritinib, pralsetinib and
fisogatinib, other than the rights licensed to CStone for these drug candidates in Mainland China, Hong Kong, Macau
and Taiwan, or the CStone territory. We currently have worldwide development and commercialization rights to all of
our discovery programs, other than the discovery-stage cancer immunotherapy programs under collaboration with
F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., which we collectively refer to as Roche, and BLU-782, which
is licensed to Clementia Pharmaceuticals, Inc., or Clementia, a wholly-owned subsidiary of Ipsen S.A .
Collaborations and Licenses
Roche. We entered into a collaboration with Roche in March 2016. Under our collaboration agreement with
Roche, we are working with Roche to discover, develop and commercialize up to four small molecule therapeutics
targeting kinases believed to be important in cancer immunotherapy, as single products or possibly in combination with
other therapeutics. In the fourth quarter of 2019, we and Roche announced one of the kinase targets under the
collaboration, MAP4K1, which is believed to play a role in T cell regulation.
5
CStone. We entered into a collaboration with CStone in June 2018. Under our collaboration agreement with
CStone, we are seeking to develop and commercialize avapritinib, pralsetinib and fisogatinib, including back-up forms
and certain other forms, in the CStone territory either as a monotherapy or as part of a combination therapy.
Clementia. In October 2019, we entered into a license agreement with Clementia, a wholly-owned subsidiary of
Ipsen S.A., and granted an exclusive, worldwide, royalty-bearing license to Clementia to develop and commercialize
BLU-782, as well as specified other compounds related to the BLU-782 program. BLU-782 is an investigational, orally
available, potent and highly selective inhibitor that targets mutant activin-like kinase 2, or ALK2, in development for the
treatment of fibrodysplasia ossificans progressiva, or FOP. Clementia is planning to commence a potentially pivotal
Phase 2 trial of BLU-782 for the treatment of FOP in 2020 as a monotherapy. The FDA has granted a rare pediatric
disease designation, orphan drug designation and fast track designation to BLU-782, each for the treatment of FOP.
We will continue to evaluate additional collaborations, partnerships and licenses that could maximize the value
for our programs and allow us to leverage the expertise of strategic collaborators, partners and licensors, including in
additional geographies where we may not have current operations or expertise. We are also focused on engaging in
collaborations, partnerships and license agreements to capitalize on our discovery platform outside of our primary
strategic focus area of cancer and rare diseases.
Our Strategy
Our vision is to leverage our scientific platform to design innovative first-in-class or best-in-class medicines
targeting novel kinase biology and become a leading platform-enabled, fully-integrated, global precision therapy
company focused on discovering, developing and commercializing a portfolio of precision therapies to patients with
cancer and rare diseases. Key elements of our strategy to achieve this goal are as follows:
• Continue to build our global commercial capability as we rapidly advance the commercial launch of
AYVAKIT in the U.S. and additional planned commercial launches for avapritinib and pralsetinib in
the U.S. and Europe.
• Continue to expand our strategic focus on SM and related mast cell disorders, including avapritinib for
the treatment of advanced and indolent SM and BLU-263 for the treatment of indolent SM, and if
successful, seek global regulatory approvals.
• Rapidly advance the clinical development of pralsetinib as a potential treatment for RET-altered
cancers, including RET-fusion NSCLC and MTC, and seek global regulatory approvals.
• Obtain global regulatory approvals for avapritinib for the treatment of third-line and later GIST
(including fourth-line GIST).
• Continue to expand our broad, differentiated pipeline of kinase drug candidates for genomically
defined cancers, rare diseases and cancer immunotherapy.
• Evaluate potential strategic collaborations and licenses to maximize the value of our programs and
platform where we may not have current operations or expertise.
• Maintain a commitment to Blueprint Medicines’ patient-focused and science-driven culture as we
grow our business.
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 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
6
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 diseases. Several kinases have
been validated as oncogenes, which are genes that when altered can initiate and maintain cancer growth. 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 kinases of unknown biology, or KUBs, which constitute
the majority of the kinome.
• 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
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
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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.
• 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.
Our Pipeline
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 genomically defined cancers, rare diseases and
cancer immunotherapy.
We currently have worldwide development and commercialization rights to avapritinib, pralsetinib and
fisogatinib, other than the rights licensed to CStone for these drug candidates in the CStone territory. We currently have
worldwide development and commercialization rights to all of our discovery programs, other than the discovery-stage
cancer immunotherapy programs under the Roche collaboration.
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The following chart summarizes our most advanced programs, each of which is described in further detail
below.
Approved
U.S.
Program
Discovery
Early-Stage
Development
Late-Stage
Development
Regulatory
Submission
MAA
NDA
NDA
NDA
NDA4 / MAA
NDA
Avapritinib
(KIT and PDGFRA)
PDGFRA
GIST1,2,3
4L GIST1,2
3L GIST1,2
2L GIST1,2
Advanced SM2
Indolent SM2
2L RET+ NSCLC1,2
1L RET+ NSCLC1,2
Pralsetinib (RET)
EGFR+ NSCLC (+osimertinib)1,2
2L MTC1,2
1L MTC1,2
Other RET-altered solid tumors1,2
Fisogatinib (FGFR4)
Advanced HCC2
Advanced HCC (+CS-1001)2
BLU-263 (KIT)
Indolent SM
EGFR+ NSCLC1
EGFR+ NSCLC1
EGFR+ C797S
double mutant
EGFR+
T790M/C797S triple
mutant
2 undisclosed targets
MAP4K15
3 undisclosed
immunokinase
targets5
Ongoing or completed
Planned
1.
2.
3.
4.
5.
Unresectable or metastatic disease.
CStone Pharmaceuticals has exclusive rights to develop and commercialize avapritinib, pralsetinib and fisogatinib in Mainland China, Hong Kong, Macau and
Taiwan. Blueprint Medicines retains all rights in the rest of the world. For more information, see “—Collaborations and Licenses” below.
Approved in the U.S. for the treatment of adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations. The proposed MAA indication is unresectable or metastatic GIST harboring a PDGFRA D842V mutation.
Expect to complete rolling NDA submission in the first quarter of 2020.
In collaboration with Roche. Blueprint Medicines has U.S. commercial rights for up to two programs. Roche has worldwide commercialization rights for up to
two programs and ex-U.S. commercialization rights for up to two programs. For more information, see “—Collaborations and Licenses” below.
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Precision Therapy Approach
Our approved therapy AYVAKIT and all of our current drug candidates and development programs target
patient populations with genomically defined diseases. Generally, as we advance our drug candidates through 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, pralsetinib and fisogatinib. 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.
Estimated Epidemiology of Patients and Frequency of Targeted Genomic Alterations
The table below lists the diseases and genomic drivers targeted by our most advanced programs, and for each of
these diseases, the corresponding estimated number of patients in the U.S., 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
Initial Diseases
U.S.
Total Major Markets
Genomic Drivers
Estimated Number of Patients (1)
Estimated
Frequency of Alteration
(% of Patients)
3,200 first line
8,500 first line
D842V mutant PDGFRA
~5-6% of primary GIST
Avapritinib
GIST
2,900 second line
7,500 second line
Avapritinib/
BLU-263
SM
3,400 (cid:149) third line
7,400 (cid:149) third line
1,600 advanced SM
3,750 advanced SM
30,000 indolent or
smoldering SM
71,250 indolent or
smoldering SM
KIT mutations
~80%
KIT D816V mutation
~95%
Pralsetinib
NSCLC
147,300 first line
374,500 first line
87,800 second line
218,000 second line
RET fusions
MTC
650 all lines
1,300 all lines
RET mutations
Fisogatinib
HCC (2)
20,200 first line
63,500 first line
7,400 second line
22,700 second line
Aberrant FGFR4 signaling
~1-2%
~60%
~30%
(1) Based on estimated prevalence for SM and MTC 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 fisogatinib.
Avapritinib and BLU-263 — Systemic Mastocytosis and other Mast Cell Disorders
Disease Overview
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, GI
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 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. Indolent SM is the most common form of SM and is characterized by often severe,
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unpredictable and debilitating symptoms due to mast cell activation. Symptoms may include hypersensitivity reactions,
including unpredictable anaphylaxis, gastrointestinal distress including severe nausea, vomiting and diarrhea, and
extensive skin rashes that cause pain, discomfort and social isolation. Advanced SM is a more rare form of SM
associated with mast cell infiltration of organ systems resulting in increasingly severe impact on life expectancy, and
includes three subsets: 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.
Population studies estimate the prevalence rate of all subtypes of SM is approximately 9.6 per 100,000 people.
Of all SM patients, advanced SM accounts for approximately 5% of the patients, and indolent SM, including an
intermediate form referred to as smoldering SM, account for the remaining 95% of patients.
The current treatment paradigm for SM varies by disease subtype. Currently, there are no approved targeted
therapies that address the approximately 95% of 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 limited KIT
D816V inhibitory activity, and imatinib does not address patients with the KIT D816V mutation.
For patients with indolent SM, management is symptom - directed and includes avoidance of triggers of mast
cell activation (such as insect stings). Treatments for indolent SM include histamine blockers, cromolyn, epinephrine,
corticosteroids, and, in cases of refractory patients, cytoreductive agents. Patients often take multiple symptom-directed
treatments to manage their disease, and a reduction in polypharmacy burden is an important treatment goal. Within
indolent SM, 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.
For patients with advanced SM, treatments include midostaurin, 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.
Avapritinib – Clinical Development for Patients with SM
We are developing avapritinib, an orally available, potent and highly selective inhibitor that targets KIT and
PDGFRA mutations, for the treatment of systemic mastocytosis.
We are currently evaluating avapritinib in the registration-enabling Phase 1 EXPLORER trial, the registration-
enabling Phase 2 PATHFINDER trial, and the registration-enabling Phase 2 PIONEER trial. We plan to present updated
data from the EXPLORER and PATHFINDER trials in the second half of 2020. In December 2019, we reported initial
data from the dose-finding portion (part 1) of the PIONEER trial at the 61st ASH annual meeting. We plan to report
updated data from part 1 of the PIONEER trial in a late-breaking oral presentation on March 14, 2020 at the AAAAI
annual meeting. Based on these data, we expect to initiate patient screening in part 2 of the PIONEER trial in the second
quarter of 2020 and complete enrollment by the end of 2020.
We plan to submit a supplemental NDA to the FDA for avapritinib for the treatment of advanced SM in the
second half of 2020, which we anticipate will be focused on data from patients in the EXPLORER and PATHFINDER
trials who started at the proposed dose of 200 mg QD, supported by pooled data from all doses. The FDA has granted
orphan drug designation to avapritinib for the treatment of mastocytosis, and the European Commission has granted
orphan medicinal product designation to avapritinib for the treatment of mastocytosis. In addition, the FDA has granted
breakthrough therapy designation to avapritinib for the treatment of advanced SM, including the subtypes of aggressive
SM, SM with an associated hematologic neoplasm and mast cell leukemia.
Phase 1 EXPLORER Trial
The EXPLORER trial is an open-label, single-arm trial designed to identify the recommended Phase 2 dose, or
RP2D, and demonstrate proof-of-concept in patients with advanced SM. Key trial endpoints include overall response
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rate, or ORR, duration of response, or DOR, quantitative measures of mast cell burden, patient-reported outcomes and
safety. The EXPLORER trial has completed patient enrollment.
Data Presented at the 24th Congress of the European Hematology Association in June 2019
As of a data cutoff date of January 2, 2019, 69 patients were treated with avapritinib in the Phase 1
EXPLORER clinical trial, including seven patients with ASM, 37 patients with SM-AHN, nine patients with MCL, 15
patients with indolent or smoldering SM, and one patient without SM who had chronic myelomonocytic leukemia.
Diagnoses were centrally reviewed by a committee of SM experts following an initial assessment by local investigators.
Forty-two patients (61 percent) had a prior treatment, including 15 patients (22 percent) who had previously received the
multi-kinase inhibitor Rydapt® (midostaurin).
Clinical Activity Data – Advanced SM. Thirty-nine patients with advanced SM (three ASM, 28 SM-AHN, eight
MCL) were evaluable for response by the modified IWG-MRT-ECNM criteria, or IWG criteria, a method for assessing
clinical response in advanced SM patients with regulatory precedent in the U.S. and Europe. Confirmation of response
was defined as a response duration of at least 12 weeks. Evaluable patients generally had more advanced disease at
baseline than the overall trial population.
In evaluable patients across all doses studied, the confirmed ORR was 77 percent. Nine patients had complete
remission with a full or partial recovery of peripheral blood counts, or CR/CRh, (23 percent), 18 patients had partial
remission (46 percent) and three patients had clinical improvement (8 percent). No patients had progressive disease as
the initial response. In addition, the 12-month DOR rate was 74 percent, and 49 patients (71 percent) remained on
treatment with durations up to nearly three years (34 months).
Across all enrolled patients, the median overall survival, or OS, was not reached. The estimated 24-month OS
rate was 78 percent in all advanced SM patients: 100 percent in ASM patients, 70 percent in SM-AHN patients and 88
percent in MCL patients.
Avapritinib demonstrated strong clinical activity in patients with SRSF2, ASXL1 and/or RUNX1, or
collectively S/A/R mutation positive genotypes, who historically have particularly poor prognoses. In 22 evaluable
patients with S/A/R genotypes, the confirmed ORR was 73 percent and five patients had a CR/CRh (23 percent).
Nearly all patients had significant declines on objective measures of mast cell burden. Across all patients
evaluable on these measures, 100 percent had a (cid:149)50 percent decline in serum tryptase, 93 percent had a (cid:149)50 percent
reduction in bone marrow mast cells, 84 percent had palpable spleens become non-palpable, and 88 percent had a (cid:149)50
percent reduction in KIT D816V mutation allele fraction.
Clinical Activity Data – Indolent or Smoldering SM. Avapritinib showed strong clinical activity in patients with
indolent or smoldering SM. Nearly all patients had (cid:149)50 percent reductions in serum tryptase, bone marrow mast cells
and KIT D816V mutation allele fraction. In addition, improvements on these measures were deep and rapid. Thirteen of
15 evaluable patients had normalized serum tryptase levels, and 12 of 13 evaluable patients had complete clearance of
mast cell aggregates from the bone marrow. All indolent and smoldering SM patients achieved a (cid:149)50 percent reduction
in serum tryptase by the first post-baseline assessment.
Safety Data. Avapritinib was generally well-tolerated with most adverse events, or AEs, reported by
investigators as Grade 1 or 2. Across all grades, the most common non-hematologic treatment-emergent AEs (regardless
of relationship to avapritinib) reported by investigators (>15 percent) were periorbital edema, diarrhea, nausea, fatigue,
peripheral edema, vomiting, cognitive effects, hair color changes, arthralgia, abdominal pain, dizziness, decreased
appetite, pruritis, constipation and dysgeusia. The most common hematologic treatment-emergent AEs reported by
investigators (>10 percent) were anemia, thrombocytopenia and neutropenia. In addition, intracranial bleeding occurred
in six patients with pre-existing thrombocytopenia, a known risk factor for intracranial bleeding, and one patient who
had a life-threatening fall prior to intracranial bleeding. Five of these patients resumed and remained on treatment with
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avapritinib following dose modifications. Cytopenias were the most common Grade 3 and 4 treatment-related AEs. No
Grade 5 treatment-related AEs were reported by investigators.
Updated Data Reported in December 2019
As of a data cutoff of August 30, 2019, updated efficacy data from the EXPLORER trial showed a centrally
confirmed ORR of 77 percent in 48 patients evaluable for response per modified IWG criteria. ORR was defined as
complete remission with full or partial recovery of peripheral blood counts, partial remission or clinical improvement.
Median DOR and median OS were not reached. Median follow-up was 21 months, with patients receiving ongoing
treatment up to approximately 3.5 years.
The safety results were generally consistent with the data reported at the 24th Congress of the European
Hematology Association, or EHA annual meeting. In 80 patients evaluable for safety as of the data cutoff date,
avapritinib was generally well-tolerated with most AEs reported by investigators as Grade 1 or 2. Across all grades, the
most common treatment-emergent AEs reported by investigators were periorbital edema, anemia, diarrhea, fatigue,
peripheral edema, nausea, thrombocytopenia, vomiting and cognitive effects. Only six patients discontinued due to
treatment-related adverse events. As of the data cutoff date, no new intracranial bleeding events had been observed in the
EXPLORER trial since our previous data presentation at the EHA annual meeting
Phase 2 PIONEER Trial
The PIONEER trial is a randomized, double-blind, placebo-controlled, registration-enabling trial in patients
with indolent and smoldering SM. Key trial endpoints include the change in patient-reported disease symptoms as
measured by the Indolent SM Symptom Assessment Form Total Symptom Score, or ISM-SAF TSS, quantitative
measures of mast cell burden and safety. Part 1 of the PIONEER trial was designed to test three doses of avapritinib
(25 mg, 50 mg and 100 mg QD) versus placebo to determine a RP2D. Major eligibility criteria included adults with
indolent SM confirmed by central pathology review and moderate to severe symptom burden, despite best available
supportive care medications. The dose-finding part 1 of the PIONEER trial has completed patient enrollment. We expect
to initiate patient screening in part 2 of the PIONEER trial in the second quarter of 2020 and complete enrollment by the
end of 2020.
Initial Data Presented at ASH Annual Meeting in December 2019
As of a data cutoff date of November 12, 2019, 39 patients were randomized in part 1 of the PIONEER trial
across four concurrent cohorts, including 10 patients in each avapritinib dose cohort and nine patients in the placebo
cohort. The enrolled population had a median time on study of 12 weeks (range: 1-30 weeks).
Baseline Patient Characteristics. At baseline, all patients had symptomatic disease despite best available
therapy. Median ISM-SAF TSS was 52 [range: 19-100 (total possible range: 0-110)]. Patients were taking a median of
three medications (range: 1-7) to treat their disease. Mean serum tryptase was 84 micrograms per liter.
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Clinical Activity Data. Across all avapritinib dose cohorts, reductions in serum tryptase were robust, occurred
rapidly and were sustained in patients treated up to 30 weeks. The placebo cohort showed no change in serum tryptase at
12 weeks.
Timepoint
Cycle 1, Day 8
(first post-baseline assessment)
Cycle 4, Day 1
(12 weeks)
Mean Percent Change in Serum Tryptase
Avapritinib
50 mg QD
Avapritinib
25 mg QD
-37.72%
-48.24%
-54.08%
-66.67%
Avapritinib
100 mg QD
-56.16%
-61.83%
Placebo
7.05%
0.39%
Tryptase is an enzyme released by activated mast cells. Elevated tryptase in blood serum is a hallmark of SM
and a component of the World Health Organization diagnostic criteria. Reduction in serum tryptase is a component of
the IWG criteria for advanced SM.
Safety Data. All doses of avapritinib tested were well-tolerated, and most reported AEs were Grade 1 or 2.
There were no reported cases of intracranial bleeding, thrombocytopenia or anemia. Across all avapritinib cohorts, five
patients (16.7 percent) had Grade 3 AEs, and no patients had serious AEs. In patients treated with placebo, two patients
(22.2 percent) had Grade 3 AEs, and two patients (22.2 percent) had serious AEs. There was one Grade 3 cognitive
effect reported in the 100 mg cohort. The event resolved following dose modification, and the patient remained on
therapy as of the data cutoff date. No patients discontinued treatment due to an AE.
Phase 2 PATHFINDER Trial
The PATHFINDER trial is an open-label, single-arm registration-enabling trial designed to confirm the clinical
activity of avapritinib in patients with advanced SM. Key trial endpoints include ORR, DOR, quantitative measures of
mast cell burden, patient-reported outcomes and safety. Patient enrollment is ongoing. We plan to present updated data
from the PATHFINDER trial in the second half of 2020.
BLU-263 – Planned Clinical Development for Patients with SM and other Mast Cell Disorders
We are developing BLU-263 for the treatment of indolent SM and other mast cell disorders. BLU-263 is an
investigational, orally available, potent and highly selective KIT inhibitor currently in the discovery stage. BLU-263 is
designed to have equivalent potency as avapritinib, improved selectivity for KIT, with low off-target activity, and lower
penetration of the central nervous system relative to avapritinib based on preclinical data, which we believe will enable
development of BLU-263 in a broad population of patients with indolent SM, including patients with lower disease
burden requiring potentially life-long chronic therapy, as well as patients with other KIT-driven mast cell disorders. We
plan to submit an IND for BLU-263 for indolent SM and initiate a Phase 1 trial in healthy volunteers in the first half of
2020.
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Pralsetinib — RET-altered Cancers
Disease Overview
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 advanced MTC (approximately 90% of patients), and RET fusions are implicated
in several cancers, including papillary thyroid carcinoma (approximately 10- 20% of patients) and NSCLC (1 - 2% of
patients). Our genomics analyses on the landscape of kinase fusions 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 DOR in patients with RET-altered NSCLC compared to selective kinase
inhibitors targeting other kinase drivers such as EGFR, ALK and ROS1.
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.
Pralsetinib — Clinical Development for Patients with RET-Altered NSCLC, MTC and other Solid Tumors
We are developing pralsetinib for the treatment of RET-altered NSCLC, MTC, and other solid tumors.
Pralsetinib is an investigational, orally available, potent and highly selective inhibitor that targets RET, a receptor
tyrosine kinase. Pralsetinib is designed to inhibit the activating RET fusions and mutations that drive cancer growth and
remain active in the presence of resistance mutations that we predict will arise from treatment with first generation
therapies. RET activating fusions and mutations drive disease in subsets of patients with NSCLC, and cancers of the
thyroid, including MTC and PTC, and our research suggests that RET may drive disease in subsets of patients with colon
cancer, breast cancer, pancreatic cancer and other cancers.
We are currently evaluating pralsetinib in the ongoing ARROW trial. In January 2020, we reported top-line
data from the ARROW trial in RET fusion-positive NSCLC patients treated with pralsetinib at the proposed dose of 400
mg QD. We plan to present the registration data from the ARROW trial of pralsetinib in RET fusion-positive NSCLC
and RET-mutant MTC in 2020. We recently announced the activation of the first trial site for the AcceleRET Lung trial
evaluating pralsetinib in patients with first-line RET fusion-positive NSCLC, and we plan to initiate a Phase 3 clinical
trial of pralsetinib in first-line RET-mutant MTC in the second half of 2020.
In January 2020, we initiated the submission of a rolling NDA to the FDA for the treatment of patients with
RET fusion-positive NSCLC and expect to complete the submission in the first quarter of 2020. We plan to submit an
NDA to the FDA for pralsetinib for the treatment of patients with MTC previously treated with an approved multi-kinase
inhibitor in the second quarter of 2020. In addition, we plan to submit an MAA to the EMA, for pralsetinib for RET
fusion-positive NSCLC in the second quarter of 2020.
The FDA has granted orphan drug designation to pralsetinib for the treatment of RET-rearranged NSCLC,
JAK1/2-positive NSCLC or TRKC-positive NSCLC, and the FDA has granted breakthrough therapy designation to
pralsetinib for the treatment of patients with RET-fusion positive NSCLC that has progressed following platinum-based
chemotherapy and to pralsetinib for the treatment of patients with RET mutation-positive MTC that requires systemic
treatment and for which there are no acceptable alternative treatments.
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Phase 1/2 ARROW Trial
The ARROW trial is a Phase 1/2 open-label, registration-enabling trial in patients with RET-altered NSCLC,
MTC and other advanced solid tumors. Trial objectives include assessing response, pharmacokinetics,
pharmacodynamics and safety. The dose-escalation portion of the ARROW trial is complete, and the expansion portion
is actively enrolling patients across various cohorts.
Data Presented at ASCO Annual Meeting in June 2019
The presented data included 120 patients with RET-fusion NSCLC, 64 patients with RET-mutant MTC and 12
patients with other RET-altered cancers (nine PTC, two pancreatic cancer and one intrahepatic bile duct carcinoma)
enrolled in the ARROW trial as of a data cutoff date of April 28, 2019. The patients with RET-fusion NSCLC and RET-
mutant MTC received a starting dose of 400 mg QD, which is the RP2D. Patients with other RET-altered cancers were
included regardless of starting dose.
At baseline, 40 percent of the RET-fusion NSCLC patients had brain metastases. Brain metastases commonly
occur in NSCLC patients, and the prognosis in these patients is typically poor. Regardless of starting dose and including
the dose-escalation portion of the ARROW trial, the RET-fusion NSCLC patients have been on treatment up to 24
months.
For clinical activity data, NSCLC and MTC patients were evaluable if they were enrolled as of November 14,
2018 with follow-up through the data cutoff date, which enabled them to have at least two radiographic scans. Tumor
response was assessed by Response Evaluation Criteria in Solid Tumors, or RECIST, version 1.1.
Clinical Activity Data — RET-Fusion NSCLC. As of the data cutoff date, 48 patients with RET-fusion NSCLC
were evaluable for response assessment, including 35 patients previously treated with platinum-based chemotherapy.
• Nearly all patients (90 percent) had radiographic tumor reductions.
• The ORR was 60 percent (one complete response, or CR, and 20 partial responses, or PRs); all
responses were confirmed), and the disease control rate, or DCR, was 100 percent in the patients
previously treated with platinum-based chemotherapy.
• The ORR was 71 percent (five confirmed PRs) in seven patients naïve to prior systemic treatment.
• Across all patients, the median DOR was not reached, and 82 percent of responders remained on
treatment as of the data cutoff date.
•
In nine patients with measurable brain metastases, 78 percent had shrinkage of brain metastases.
• No patients starting at the 400 mg QD dose had disease progression due to new brain involvement.
• Pralsetinib was highly active regardless of RET fusion partner, including RET-KIF5B and RET-
CCDC6.
Clinical Activity Data — RET-Mutant MTC and Other RET-Altered Cancers. As of the data cutoff date, 32
patients with RET-mutant MTC were evaluable for response assessment, including 16 patients previously treated with
the multi-kinase inhibitors cabozantinib or vandetanib.
• The ORR was 63 percent (nine confirmed PRs, one PR pending confirmation) and the DCR was 94
percent in RET-mutant MTC patients previously treated with cabozantinib or vandetanib.
• Across all RET-mutant MTC patients, the median DOR was not reached and all responders remained
on treatment as of the data cutoff date, with treatment durations up to 15.6 months for patients
receiving a starting dose of 400 mg QD.
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As of the data cutoff date, clinical activity data were reported in patients with other RET-altered cancers:
• Six patients with PTC were evaluable for response assessment by RECIST version 1.1. In these
patients, the ORR was 83 percent (three confirmed PRs, two PRs pending confirmation).
• Five patients with PTC have remained on treatment for one year or longer, and eight patients with PTC
remained on treatment as of the data cutoff date.
• Additional responses were observed in patients with other RET-fusion cancers, including pancreatic
cancer (one confirmed PR, one PR pending confirmation) and intrahepatic bile duct carcinoma (one
confirmed PR).
Four patients (two with RET-fusion NSCLC, two with RET-mutant MTC) enrolled in the ARROW trial were
previously treated with selpercatinib. Among them:
• Two patients had a PR, one of which was confirmed as of the data cutoff date, and one of which was
pending as of the data cutoff date and subsequently confirmed prior to the presentation.
• One patient had stable disease with radiographic tumor reductions and remained on treatment as of the
data cutoff date.
Safety Data. As of the data cutoff date, 226 patients received a starting dose of 400 mg QD and were evaluable
for safety. Across all patients, pralsetinib was well-tolerated and most AEs reported by investigators were Grade 1 or 2.
Across all grades, the most common treatment-emergent AEs (regardless of relationship to pralsetinib) reported by
investigators ((cid:149)15 percent) were constipation, hypertension, increased aspartate aminotransferase, neutropenia, diarrhea,
fatigue, anemia, increased alanine aminotransferase and increased blood creatinine. Investigator-reported Grade 3 or 4
treatment-related AEs ((cid:149)2 percent) included neutropenia, hypertension, anemia, increased blood creatine phosphokinase
and leukopenia.
Across all patients, only four percent of patients discontinued treatment with pralsetinib due to treatment-related
AEs. Seven percent of patients with RET-fusion NSCLC discontinued treatment with pralsetinib due to treatment-related
AEs, and no patients with RET-mutant MTC discontinued treatment with pralsetinib due to treatment-related AEs.
Top-line Data Reported for Pralsetinib in NSCLC Patients in January 2020
Top-line efficacy data were reported for patients treated with pralsetinib who were evaluable for response
assessment per RECIST version 1.1, as determined by blinded independent central review, as of a data cutoff date
of November 18, 2019. All patients received the proposed dose of 400 mg QD.
In 80 patients with RET fusion-positive NSCLC previously treated with platinum-based chemotherapy, the
ORR was 61 percent (95% confidence interval, or CI: 50-72%) per independent central review (two responses pending
confirmation). Overall, 95 percent of patients had tumor shrinkage, including 14 percent of patients with complete
regression of target tumors. The median DOR was not reached (95% CI: 11.3 months, not estimable).
In 26 patients with treatment-naïve RET fusion-positive NSCLC, the ORR was 73 percent (95% CI: 52-88%)
per independent central review (all responses confirmed), with 12 percent of patients achieving CR. All patients had
tumor shrinkage.
Top-line safety data were consistent with those reported at the ASCO Annual Meeting in June 2019. Pralsetinib
was well-tolerated, and most AEs were Grade 1 or 2. Across all patients enrolled in the ARROW trial treated with the
proposed dose of 400 mg QD (N=354), only four percent of patients discontinued treatment with pralsetinib due to
treatment-related AEs.
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Phase 3 AcceleRET Lung Trial
We recently announced the activation of the first trial site for the AcceleRET Lung trial evaluating pralsetinib
in patients with first-line RET fusion-positive NSCLC. The primary objective of the AcceleRET Lung trial is to evaluate
the potential of pralsetinib to extend progression free survival, or PFS, compared to platinum-based chemotherapy with
or without pembrolizumab in patients with first-line RET fusion-positive NSCLC. The trial’s primary endpoint is PFS,
and secondary endpoints include OS, ORR and DOR.
Avapritinib — Gastrointestinal Stromal Tumors (GIST)
Disease Overview
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 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 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 PDGFRA 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.
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 PDGFRA. 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 PDGFRA gene is D842V, found in approximately 5 - 6% of frontline GIST patients. Currently,
AYVAKIT is the only FDA-approved treatment for patients with D842V mutant PDGFRA-driven GIST. PDGFRA has
a very similar active site structure to KIT, and the PDGFRA D842V mutation is homologous to KIT D816V.
AYVAKIT (avapritinib) — FDA-Approved Therapy for Unresectable or Metastatic GIST Harboring a PDGFRA
Exon 18 Mutation
We are developing avapritinib for the treatment of GIST, a rare disease that is a sarcoma, or tumor of bone or
connective tissue, of the GI tract. Avapritinib is an orally available, potent and highly selective inhibitor that targets KIT
and PDGFRA mutations. These mutations abnormally activate receptor tyrosine kinases that are drivers of GIST.
In January 2020, the FDA granted approval of avapritinib under the brand name AYVAKIT for the treatment of
adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations. The efficacy of AYVAKIT was established from 43 patients in the NAVIGATOR trial with unresectable or
metastatic GIST harboring PDGFRA exon 18 mutations, including 38 patients with PDGFRA D842V mutations. The
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safety of AYVAKIT in patients with unresectable or metastatic GIST was evaluated in 204 patients who received 300
mg QD or 400 mg QD dosing in the NAVIGATOR trial.
In addition, the FDA has granted breakthrough therapy designation to avapritinib for the treatment of patients
with unresectable or metastatic GIST harboring the PDGFRA D842V mutation. The FDA has also granted orphan drug
designation to avapritinib for the treatment of GIST and fast track designation to avapritinib for (i) the treatment of
patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a second tyrosine
kinase inhibitor and (ii) the treatment of patients with unresectable or metastatic GIST with the PDGFRA D842V
mutation regardless of prior therapy.
Avapritinib — Clinical Development for Patients with Advanced GIST
We are also developing avapritinib for the treatment of third-line and later GIST (including fourth-line GIST).
We are currently evaluating avapritinib for the treatment of GIST in the VOYAGER trial. The FDA is currently
reviewing our NDA for avapritinib for the treatment of fourth-line GIST, and this application has a PDUFA action date
of May 14, 2020. As part of the review, the FDA has requested top-line data from our VOYAGER trial. We expect to
provide the top-line data to the FDA early in the second quarter of 2020 to enable the FDA to take action by the PDUFA
action date and we also expect to report the top-line data in the second quarter of 2020.
Based on data from the VOYAGER trial, we plan to submit a supplemental NDA to the FDA for avapritinib for
the treatment of third-line GIST in the second half of 2020. In addition, the EMA is currently reviewing our MAA for
the treatment of adult patients with PDGFRA D842V mutant GIST, regardless of prior therapy, and we anticipate a
decision from the European Commission in the third quarter of 2020. We plan to pursue an MAA for third-line and later
GIST (including fourth-line GIST) based on data from our VOYAGER trial.
The FDA has granted breakthrough therapy designation to avapritinib for the treatment of patients with
unresectable or metastatic GIST harboring the PDGFRA D842V mutation. The FDA has also granted orphan drug
designation to avapritinib for the treatment of GIST and fast track designation to avapritinib for (i) the treatment of
patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a second tyrosine
kinase inhibitor and (ii) the treatment of patients with unresectable or metastatic GIST with the PDGFRA D842V
mutation regardless of prior therapy. In addition, the European Commission has granted orphan medicinal product
designation to avapritinib for the treatment of GIST.
Phase 1 NAVIGATOR Trial
The NAVIGATOR trial is a registration-enabling trial designed to evaluate the safety, tolerability and clinical
activity of avapritinib in patients with unresectable or metastatic GIST. The trial consists of two parts, a dose escalation
portion and an expansion portion. Trial objectives include assessing response using blinded central radiology review, as
well as pharmacokinetics and pharmacodynamic measures. The NAVIGATOR trial has completed patient enrollment.
Data Presented at ASCO Annual Meeting in June 2019 for Fourth-Line GIST
As of a data cutoff date of November 16, 2018, 204 patients were treated with avapritinib at a starting dose of
300 or 400 mg QD in the NAVIGATOR trial. Patients with fourth-line or later GIST had a median of four prior lines of
therapy (ranging from three to 11) prior to receiving avapritinib.
Clinical Activity Data. As of the data cutoff date, 111 patients with fourth-line GIST were treated at a starting
dose of 300 or 400 mg QD and evaluable for response assessments. Patients were evaluable if they had at least one
centrally reviewed radiographic scan, and data were based on modified RECIST version 1.1 for GIST.
In evaluable patients with fourth-line GIST:
• The ORR was 22 percent, with one confirmed CR and 23 PRs (one pending confirmation).
• The median DOR was 10.2 months.
• Median follow-up was 10.8 months.
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Safety Data. Avapritinib had a favorable safety profile in patients treated at a starting dose of 300 or 400 mg
QD, with most AEs determined by investigators to be Grade 1 or 2 as of the data cutoff date. Across all patients treated
with avapritinib as of the data cutoff date, eight percent of patients discontinued treatment with avapritinib due to
treatment-related AEs. A lower incidence of commonly reported AEs was reported at 300 mg QD dosing compared to
400 mg QD dosing.
Across all grades, the most common treatment-emergent AEs (regardless of relationship to avapritinib) reported
by investigators ((cid:149)25 percent) were nausea, fatigue, anemia, cognitive effects, periorbital edema, vomiting, decreased
appetite, diarrhea, increased lacrimation and peripheral edema. Investigator-reported Grade 3 or 4 treatment-related AEs
((cid:149)2 percent) included anemia, fatigue, cognitive effects, increased blood bilirubin, diarrhea, hypophosphatemia,
decreased neutrophil count, neutropenia and lymphopenia.
Phase 3 VOYAGER Trial
The VOYAGER trial is a global, open-label, randomized, registration-enabling Phase 3 trial designed to
evaluate the safety and efficacy of avapritinib versus regorafenib in patients with third- or fourth-line GIST. The trial is
designed to enroll patients randomized 1:1 to receive either avapritinib or regorafenib at multiple sites. The trial’s
primary endpoint is PFS and secondary endpoints include ORR, OS and European Organisation for Research and
Treatment of Cancer Quality of Life individual scores in patients. We expect to provide the top-line data to the FDA
early in the second quarter of 2020 and report the top-line data in the second quarter of 2020.
Fisogatinib — Hepatocellular Carcinoma
Disease Overview
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 U.S., 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 the approvals of nivolumab, pembrolizumab and
levantinib, 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), the multi-kinase inhibitors sorafenib,
regorafenib, cabozantinib and levantinib, and the immunotherapies nivolumab and pembrolizumab. There are no
approved treatments that selectively target FGFR4. Sorafenib and levantinib have overall response rates of 2% and 19%,
respectively, in treatment-naïve patients. Nivolumab, pembrolizumab, regorafenib and cabozantinib have overall
response rates ranging from 4 to 17% in patients previously treated with or intolerant to sorafenib. In clinical practice,
patients often require dose modifications or discontinue therapy with multi-kinase inhibitors 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.
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The FGFR4 signaling pathway is a promising new driver for the development of molecularly targeted therapy
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.
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.
Fisogatinib — Clinical Development for Patients with Advanced HCC
We are developing fisogatinib for the treatment of advanced HCC. Fisogatinib is an investigational, orally
available, potent and highly selective inhibitor that targets FGFR4, a kinase that is aberrantly activated in a defined
subset of patients with HCC, the most common type of liver cancer. We are currently evaluating fisogatinib in an
ongoing Phase 1 clinical trial in patients with advanced HCC. As part of our collaboration with CStone, we are also
evaluating fisogatinib in combination with CS1001, a clinical-stage anti-PDL1 immunotherapy being developed by
CStone, for the treatment of locally advanced or metastatic HCC in an ongoing Phase 1b/2 trial conducted in multiple
clinical sites in China. See “—Collaborations and Licenses” below for more information. The FDA has granted orphan
drug designation to fisogatinib for the treatment of HCC.
Collaborations and Licenses
Roche
In March 2016, we entered into a collaboration and license agreement, or the Roche agreement, as may be
amended from time to time, with Roche for the discovery, development and commercialization of small molecule
therapeutics targeting kinases believed to be important in cancer immunotherapy, as single products or possibly in
combination with other therapeutics. As a result of an amendment to the Roche agreement in the fourth quarter of 2019,
we and Roche are currently conducting activities for up to four programs under the collaboration. In the fourth quarter of
2019, we and Roche announced one of the kinase targets under the collaboration, MAP4K1, which is believed to play a
role in T cell regulation.
Under the Roche agreement, Roche was initially 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 two collaboration programs, if Roche exercises
its option, Roche will receive worldwide, exclusive commercialization rights for the licensed products. For up
to two collaboration programs, if Roche exercises its option, we will retain commercialization rights in the U.S. for the
licensed products, and Roche will receive commercialization rights outside of the U.S. 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
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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 U.S.
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 $940.0 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 $190.0 million are for option fees and milestone
payments for research, pre-clinical and clinical development events prior to licensing across all four potential
collaboration programs. In the second quarter of 2018, we achieved and received a $10.0 million research milestone
payment. In the fourth quarter of 2019, we achieved and received an $8.0 million research milestone payment. 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 U.S., 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 U.S. for the
collaboration programs on which we will retain rights in the U.S., with Roche receiving a license under our intellectual
property to develop and commercialize such licensed products outside of the U.S.
Subject to the terms and conditions of the Roche agreement, we have agreed to work exclusively with Roche
with respect to each collaboration target. We are not obligated to work exclusively with Roche within the field of cancer
immunotherapy. 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 U.S. 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
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.
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CStone
On June 1, 2018, we entered into a collaboration and license agreement, or the CStone agreement, with CStone
pursuant to which we granted CStone exclusive rights to develop and commercialize avapritinib, pralsetinib and
fisogatinib, including certain back-up forms and certain other forms thereof, which we refer to collectively as the
licensed products, in the CStone territory, either as a monotherapy or as part of a combination therapy. We will retain
exclusive rights to the licensed products outside the CStone territory.
We received an upfront cash payment of $40.0 million, and subject to the terms of the CStone agreement, will
be eligible to receive up to approximately $346.0 million in milestone payments, including $118.5 million related to
development and regulatory milestones and $227.5 million related to sales-based milestones. In addition, CStone will be
obligated to pay us tiered percentage royalties on a licensed product-by-licensed product basis ranging from the mid-
teens to low twenties on annual net sales of each licensed product in the CStone territory, subject to adjustment in
specified circumstances. CStone will be responsible for costs related to the development of the licensed products in the
CStone territory, other than specified costs related to the development of fisogatinib as a combination therapy in the
CStone territory that will be shared by us and CStone. During the year ended December 31, 2019, we achieved several
development and regulatory milestones resulting in an aggregate of $12.0 million in milestone payments paid or payable
by CStone under the CStone agreement.
Pursuant to the terms of the CStone agreement, CStone will be responsible for conducting all development and
commercialization activities in the CStone territory related to the licensed products. Subject to specified exceptions,
during the term of the CStone agreement, each party has agreed that neither it nor its affiliates will conduct specified
development and commercialization activities in the CStone territory related to selective inhibitors of FGFR4, KIT,
PDGFRA and RET. In addition, under the CStone 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 CStone
agreement, including license grants to enable each party to conduct research, development and commercialization
activities pursuant to the terms of the CStone agreement.
The CStone agreement will continue on a licensed product-by-licensed product and region-by-region basis until
the later of (i) 12 years after the first commercial sale of a licensed product in a region in the CStone territory and (ii) the
date of expiration of the last valid patent claim related to our patent rights or any joint collaboration patent rights for the
licensed product that covers the composition of matter, method of use or method of manufacturing such licensed product
in such region. Subject to the terms of the CStone agreement, CStone may terminate the CStone agreement in its entirety
or with respect to one or more licensed products for convenience by providing written notice to us after June 1, 2019,
and CStone may terminate the CStone agreement with respect to a licensed product for convenience at any time by
providing written notice to us following the occurrence of specified events. In addition, we may terminate the CStone
agreement under specified circumstances if CStone or certain other parties challenges our patent rights or any joint
collaboration patent rights or if CStone or its affiliates do not conduct any material development or commercialization
activities with respect to one or more licensed products for a specified period of time, subject to specified exceptions.
Either party may terminate the CStone agreement for the other party’s uncured material breach or insolvency. In certain
termination circumstances, the parties are entitled to retain specified licenses to be able to continue to exploit the
licensed products, and in the event of termination by CStone for our uncured material breach, we will be obligated to pay
CStone a low single digit percentage royalty on a licensed product-by-licensed product on annual net sales of such
licensed product in the CStone territory, subject to a cap and other specified exceptions.
Clementia
On October 15, 2019, we entered into a license agreement, or the Clementia agreement, with Clementia, a
wholly-owned subsidiary of Ipsen S.A. Under the Clementia agreement, we granted an exclusive, worldwide, royalty-
bearing license to Clementia to develop and commercialize BLU-782, an oral, highly selective investigational ALK2
inhibitor in Phase 1 clinical development for the treatment of FOP, as well as specified other compounds related to the
BLU-782 program, which we refer to as the Clementia licensed products.
We received an upfront cash payment of $25 million, and subject to the terms of the Clementia agreement, we
will be eligible to receive up to $510.0 million in other payments and potential development, regulatory and sales-based
milestone payments for the Clementia licensed products. In addition, Clementia is obligated to pay to us royalties on
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aggregate annual worldwide net sales of Clementia licensed products at tiered percentage rates ranging from the low- to
mid-teens, subject to adjustment in specified circumstances under the Clementia agreement, and to purchase specified
manufacturing inventory from our company.
Under the terms of the Clementia agreement, we will be responsible for specified activities during a transition
period, including the completion of all activities necessary for database lock for the ongoing Phase 1 clinical trial in
healthy volunteers, and Clementia will be responsible for conducting all other development and commercialization
activities related to the Clementia licensed products, including the design, timing and conduct of any Phase 2 clinical
trial evaluating BLU-782 for the treatment of FOP.
During the term of the agreement, we have agreed not to exploit any compound covered by the licensed patents
for the treatment of FOP or multiple osteochondromas, or MO. In addition, with respect to any small molecule
compound not covered by the licensed patents, we have agreed not to research, develop or manufacture any small
molecule compound for the treatment of FOP or MO for a period of five years from the effective date of the Clementia
agreement and not to commercialize any small molecule compound for the treatment of FOP or MO for a period of
seven years from the effective date of the Clementia agreement.
Unless earlier terminated in accordance with the terms of the Clementia agreement, the agreement will expire
on a country-by-country, licensed product-by-licensed product basis on the date when no royalty payments are or will
become due. Clementia may terminate the agreement at any time on or after the second anniversary of the effective date
of the agreement upon at least 12 months’ prior written notice to us, which cannot be delivered before the first
anniversary of the effective date. Either party may terminate the 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 Clementia licensed products.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual
property protection for avapritinib, pralsetinib, fisogatinib and BLU-263, as well as our core technologies, including our
novel target discovery engine, 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 AYVAKIT and 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 and to other technologies, including patient selection markers and diagnostic discoveries that may be useful
with our drug and drug candidates. 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 January 31,
2020, we owned 31 issued U.S. patents, 19 pending U.S. patent applications, 12 pending U.S. provisional applications,
38 issued foreign patents, 141 foreign pending patent applications, and five pending Patent Cooperation Treaty, or PCT,
international patent applications. The foreign issued patents and patent applications are in a number of jurisdictions,
including Argentina, Australia, Brazil, Canada, China, the European Union, Gulf Cooperation Council, Hong Kong,
Israel, Japan, South Korea, Mexico, New Zealand, Philippines, Russia, Singapore, South Africa, and Taiwan. Our issued
patents and pending patent applications pertain to our pipeline, including our programs for avapritinib, pralsetinib,
fisogatinib, BLU-263 as well as additional kinase discovery programs and novel recurrent fusions.
The intellectual property portfolios for our most advanced programs as of January 31, 2020 are summarized
below. Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the
USPTO and by patent offices in other countries are 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.
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KIT and PDGRFA Program — AYVAKIT (avapritinib) and BLU-263
The intellectual property portfolio for our KIT and PDGFRA program contains patent applications directed to
compositions of matter for avapritinib, BLU-263 and analogs thereof, compositions of matter for KIT and PDGFRA
inhibitors with different compound families, as well as methods of use and manufacture. As of January 31, 2020, we
owned nine issued U.S. patents, 10 issued foreign patents, including one European patent validated in 38 countries, two
pending U.S. non-provisional patent applications, seven pending U.S. provisional applications, one pending PCT
international patent application and 21 pending foreign patent applications directed to our KIT and PDGFRA program,
including avapritinib and BLU-263. The patents that have issued or will issue covering our KIT and PDGFRA program
will have a statutory expiration date between 2034 and 2040. Patent term adjustments or patent term extensions could
result in later expiration dates.
RET Program — Pralsetinib
The intellectual property portfolio for our RET program contains patent applications directed to compositions
of matter for pralsetinib and analogs and compositions of matter for RET inhibitors with different compound families, as
well as methods of use. As of January 31, 2020, we owned five issued U.S. patents, four pending U.S. non-provisional
patent applications, two pending PCT international applications and 30 pending foreign patent applications directed to
our RET program, including pralsetinib. The patents that have issued or will issue covering our RET program will have a
statutory expiration date between 2036 and 2039. Patent term adjustments or patent term extensions could result in later
expiration dates.
FGFR4 Program — Fisogatinib
The intellectual property portfolio for our FGFR4 program contains patent applications directed to
compositions of matter for fisogatinib and analogs and compositions of matter for FGFR4 inhibitors with different
compound families as well as methods of use. As of January 31, 2020, we owned eight issued U.S. patents, three
pending U.S. patent applications, one pending PCT international application, 31 pending foreign patent applications and
22 issued foreign patents directed to our FGFR4 program, including fisogatinib. The patents that have issued or will
issue covering our FGFR4 program will have a statutory expiration date between 2033 and 2039. Patent term
adjustments or patent term extensions could result in later expiration dates.
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
January 31, 2020, we owned six issued U.S. patents, seven pending U.S. patent applications, seven pending European
Union patent applications and five issued European patent 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 U.S., the patent term is 20 years from the earliest filing date of a
non - provisional patent application. In the U.S., 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, drug candidates and technologies will depend on our success in obtaining
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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 U.S. 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 or drug candidate we may develop, it is possible that, before
any of our approved drugs or 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.
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, third-party service providers, and scientific advisors, and
non - competition, non - solicitation, confidentiality, and invention assignment agreements with our employees. We have
also executed agreements requiring assignment of inventions with selected scientific advisors, consultants 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. AYVAKIT and any other 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 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
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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 AYVAKIT and our current or future 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.
AYVAKIT or our drug candidates, if approved for the indications for which we are currently conducting or
planning clinical trials, will compete with the drugs discussed below and will likely compete with other drugs that are
currently in development.
SM
We are developing avapritinib for SM, including advanced SM and indolent and smoldering SM, and we are
developing BLU-263 for the treatment of indolent SM and other mast cell disorders. 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. In addition, if avapritinib is approved for advanced SM or if avapritinib or BLU-263 are
approved for indolent SM, they may face competition from other drug candidates in development for these indications,
including drug candidates being developed by AB Science S.A. and Allakos Inc.
GIST
We are developing avapritinib for advanced GIST. Currently, AYVAKIT is the only FDA-approved treatment
of adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations. If avapritinib receives marketing approval for third-line GIST, it will face competition from Bayer AG’s
regorafenib, and if avapritinib receives marketing approval for second-line GIST, it will face competition from Pfizer
Inc.’s sunitinib. In addition, AYVAKIT may face competition from drug candidates in development for GIST, including
PDGFRA D842V mutant GIST, including those being developed 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, Exelixis, Inc., Ningbo Tai Kang Medical Technology Co. Ltd. and
Xencor, Inc.
RET-altered Cancers
We are developing pralsetinib for patients with RET-altered NSCLC, MTC and other advanced solid tumors. If
pralsetinib receives marketing approval for patients with RET-driven cancers, it may face competition from other drug
candidates in development, including those being developed by AstraZeneca plc, Boston Pharmaceuticals, Inc., Eisai
Inc., Exelixis, Inc., GlaxoSmithKline plc, Loxo Oncology, Inc., a wholly-owned subsidiary of Eli Lilly and Company,
Mirati Therapeutics, Inc., Novartis AG, Pfizer Inc. Roche, Stemline Therapeutics, Inc., and Turning Point Therapeutics,
Inc., as well as several approved multi-kinase inhibitors with RET activity being evaluated in clinical trials, including
alectinib, apatinib, cabozantinib, dovitinib, lenvatinib, sorafenib, sunitinib and vandetinib.
HCC
We are developing fisogatinib for patients with advanced HCC. If fisogatinib receives marketing approval for
patients with FGFR4-activated HCC, it will face competition from Bristol-Myers Squibb Company’s nivolumab and
Merck & Co., Inc.’s pembrolizumab, immune checkpoint inhibitors approved by the FDA for the treatment of HCC, as
well as sorafenib, cabozantinib, regorafenib and lenvatinib, multi-kinase inhibitors approved for the treatment of HCC.
In addition, fisogatinib 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.
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Commercialization
Our vision is to leverage our scientific platform to design innovative first-in-class or best-in-class medicines
targeting novel kinase biology and become a leading platform-enabled, fully-integrated, global precision therapy
company focused on discovering, developing and commercializing a portfolio of precision therapies to patients with
cancer and rare diseases. We have established our own commercial organization in the U.S. in connection with our
commercial launch of AYVAKIT in January 2020. We are continuing to expand our commercialization capabilities and
to build our distribution capabilities with an initial focus on the U.S. and Europe.
We believe our portfolio strategy focused on genomically defined cancers, rare diseases and cancer
immunotherapy will allow us to efficiently commercialize any approved drugs in the U.S. and Europe on our own
initially and worldwide longer - term, using a small and highly specialized sales force similar to those of other rare
disease companies. However, we may also establish collaborations with pharmaceutical companies to leverage their
capabilities to maximize the potential of our pipeline. We currently have worldwide development and commercialization
rights to avapritinib, pralsetinib and fisogatinib, other than the rights licensed to CStone for these drug candidates in the
CStone territory.
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 drug we may commercialize. To date, we have obtained
materials for avapritinib, pralsetinib, BLU-263 and fisogatinib for our for our ongoing and planned clinical testing from
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. Although we may enter into long-term supply arrangements for the commercial
supply of AYVAKIT in the future, we currently obtain our supplies of AYVAKIT from these manufactures on a
purchase order basis and may continue to do so in the near future.
We do not currently have arrangements in place for redundant supply for commercial active pharmaceutical
ingredient, or API, and drug substance or for clinical and commercial drug product. As we have done for AYVAKIT, for
all of our drug candidates, we intend to identify and qualify additional manufacturers to provide the API, drug substance
and drug product prior to submission of an NDA to the FDA and/or an MAA to the EMA.
Avapritinib, pralsetinib, BLU-263 and fisogatinib 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, third parties are responsible for the commercialization of companion diagnostic tests for avapritinib in order to
identify GIST patients with the PDGFRA D842V mutation, pralsetinib in order to identify NSCLC patients with RET
fusions and fisogatinib in order to identify HCC patients with FGFR4 pathway activation. 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 U.S. 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.
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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 U.S., 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 U.S. The
process required by the FDA before a drug may be marketed in the U.S. 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 good laboratory practice, or GLP, regulations;
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;
review of the drug candidate by an FDA advisory committee, where appropriate or if applicable;
payment of user fees for FDA review of the NDA (unless a fee waiver applies);
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, or cGMP, requirements;
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
U.S.
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, where applicable. 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
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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
pharmacokinetic, or 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 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
(from several hundred to several thousand subjects) at multiple sites, in multiple countries 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 physician labeling. 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
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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. FDA approval of an NDA must
be obtained before a drug may be offered for sale in the U.S.
In addition, under the Pediatric Research Equity Act, or PREA, as amended, 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 2020 fee schedule,
effective through September 30, 2020, the user fee for an application requiring clinical data, such as an NDA, is
$2,942,965. PDUFA also imposes an annual prescription drug product program fee for human drugs ($325,424). 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, for a new molecular entity 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 submission of a major amendment at any time during the review cycle may extend
the PDUFA action date by up to three months. Only one extension can be given per review cycle. 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
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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, withdraw the application or request a hearing. 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 U.S. 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
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
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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 drug 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.
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. 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, which is 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 U.S., 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
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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 commitments, which may include testing that are sometimes referred
to as post-marketing studies or clinical studies, 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 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 U.S., 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 U.S.,
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.
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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 U.S. 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 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 U.S.
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 U.S., or if it affects more than 200,000 individuals in the U.S., 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 U.S. In the European Union, the European Commission, after receiving the opinion of the
EMA’s Committee for Orphan Medicinal Products, or COMP, grants medicinal product 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
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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 U.S., 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, medicinal product 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 medicinal product 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 PDGFRA D842V mutation, pralsetinib in order to identify
NSCLC patients with RET fusions and fisogatinib in order to identify HCC patients with FGFR4 pathway activation. In
the U.S., 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,
establishment registration and device 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
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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 European Economic Area, or EEA (which is comprised of the 27 Member States of the European Union
plus Norway, Iceland and Liechtenstein), 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
U.S., medicinal products can only be marketed if a marketing authorization from the competent regulatory agencies has
been obtained.
Similar to the U.S., 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 (EU) No 536/2014 will apply following confirmation of full functionality of the Clinical Trials Information
System (CTIS), the centralized European Union portal and database for clinical trials foreseen by the regulation, through
an independent audit. The regulation becomes applicable six months after the European Commission publishes notice of
this confirmation 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 United Kingdom and the EEA, 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
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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.
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 U.S., 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.
Data Privacy and Security Laws
Pharmaceutical companies may be subject to U.S. federal and state health information privacy, security and
data breach notification laws, which may govern the collection, use, disclosure and protection of health-related and other
personal information. State laws may be more stringent, broader in scope or offer greater individual rights with respect
to protected health information, or PHI, than HIPAA and state laws may differ from each other, which may complicate
compliance efforts. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a
complaint about privacy practices or an audit by the Department of Health and Human Services, or HHS, may be subject
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to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations
if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-
compliance.
Many state laws govern the privacy of personal information in specified circumstances. For example, in
California the California Consumer Protection Act, or CCPA, which went into effect on January 1, 2020, establishes a
new privacy framework for covered businesses by creating an expanded definition of personal information, establishing
new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer
data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA
and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. While
clinical trial data and information governed by HIPAA are currently exempt from the current version of the CCPA, other
personal information may be applicable and possible changes to the CCPA may broaden its scope.
European Union member states, the United Kingdom, Switzerland and other jurisdictions have also adopted
data protection laws and regulations, which impose significant compliance obligations. In the EEA and the United
Kingdom, the collection and use of personal data, including clinical trial data, is governed by the provisions of the
General Data Protection Regulation, or GDPR. The GDPR, together with national legislation, regulations and guidelines
of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations
and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and
adverse event reporting. In particular, these obligations and restrictions concern the consent of the individuals to whom
the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA or the
United Kingdom, security breach notifications, security and confidentiality of the personal data and imposition of
substantial potential fines for breaches of the data protection obligations. European data protection authorities may
interpret the GDPR and national laws differently and impose additional requirements, which add to the complexity of
processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices
are often updated or otherwise revised.
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. In the U.S. and
markets in other countries, patients who are prescribed treatments for their conditions and providers performing the
prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Thus,
even if a drug is approved, sales of the drug will depend, in part, on the extent to which third-party payors, including
government health programs in the U.S. such as Medicare and Medicaid, commercial health insurers and managed care
organizations, provide coverage, and establish adequate reimbursement levels for, the product. In the U.S., no uniform
policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and
reimbursement for drug products can differ significantly from payor to payor. The process for determining whether a
third-party payor will provide coverage for a product may be separate from the process for setting the price or
reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors may limit
coverage to specific products on an approved list, also known as a formulary, which might not include all of the
approved products for a particular indication.
These third - party payors are increasingly reducing or restricting 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
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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. Any negotiated prices for
our drugs covered by a Part D prescription drug plan may 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
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 U.S. 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 2029 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.
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
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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. Further, on June 14, 2018, the U.S. Court of Appeals for the
Federal Circuit ruled that the federal government was not required to pay more than $12 billion in Affordable Care Act
risk corridor payments to third-party payors who argued the payments were owed to them. On December 10, 2019, the
U.S. Supreme Court heard arguments in Moda Health Plan, Inc. v. United States, which will determine whether the
government must make risk corridor payments. The U.S. Supreme Court’s decision will be released in the coming
months, but we cannot predict how the U.S. Supreme Court will rule. In addition, the Centers for Medicare & Medicaid
Services, the agency responsible for administering the Medicare program, or CMS, 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
pricing arrangements for any of our drugs. Historically, drugs launched in the European Union do not follow price
structures of the U.S. 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 drug 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 drug 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.
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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 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 CMS, 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
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 January 31, 2020, we had 383 full - time employees, including 114 employees with M.D. or Ph.D. degrees.
Of these full - time employees, 22(cid:20) employees are engaged in research and development 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.
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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 review our
electronically filed reports and other information that we file with the SEC on the SEC’s website at http://www.sec.gov.
Investors and others should note that we announce material information to our investors using our corporate
website (https://www.blueprintmedicines.com/), including without limitation the “Investors & Media” and
“Presentations & Publications” sections, SEC filings, press releases, public conference calls and webcasts. We use these
channels as well as social media to communicate with the public about our company, our business, our drug and drug
candidates and other matters. It is possible that the information we post on social media could be deemed to be material
information. Therefore, we encourage investors, the media, and others interested in our company to review the
information we post on the social media channels listed on the “Investors & Media” section of our corporate website.
The contents of our website and social media channels are not, however, a part of this Annual Report on Form 10-K.
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
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 precision therapy company with a limited operating history. We have incurred significant operating losses
since our inception and anticipate that we will incur continued losses for the foreseeable future.
We are a precision therapy 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, undertaking pre-clinical studies and conducting clinical trials for our drug candidates and establishing a
commercial infrastructure. In January 2020, the FDA granted approval of avapritinib under the brand name AYVAKIT
for the treatment of adults with unresectable or metastatic gastrointestinal stromal tumors, or GIST, harboring a
PDGFRA exon 18 mutation, including PDGFRA D842V mutations. We are also developing avapritinib for additional
indications in the U.S. and other geographies. All of our drug candidates are still in pre-market preclinical and clinical
development, with the exception of AYVAKIT.
We have not yet demonstrated our ability to successfully complete any large-scale or pivotal clinical trials.
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 are in the early stages of transitioning from a company with a research
focus to a company capable of supporting commercial activities and we have not yet demonstrated out ability to conduct
large-scale sales and marketing activities necessary for successful commercialization. We may not be successful in such
a transition.
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Since inception, we have focused substantially all of our efforts and financial resources 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 the active pharmaceutical ingredient, or API, drug substance and drug product
material for use in pre-clinical studies and clinical trials, conducting pre-clinical studies and commencing clinical
development, pre-commercial activities and the commercial launch of AYVAKIT. To date, we have financed our
operations primarily through public offerings of our common stock, private placements of our convertible preferred
stock, collaborations, a license agreement and a debt financing. Through December 31, 2019, we have received an
aggregate of $1.5 billion from such transactions, including $1.2 billion in aggregate gross proceeds from the sale of
common stock in our May 2015 initial public offering, or IPO, and December 2016, April 2017, December 2017 and
April 2019 follow - on public offerings, $115.1 million in gross proceeds from the issuance of convertible preferred stock,
$18.8 million in upfront and milestone payments under our former collaboration with Alexion Pharma Holding, or
Alexion, $63.0 million in upfront and milestone payments under our collaboration with F. Hoffmann-La Roche Ltd and
Hoffmann-La Roche Inc., which we refer to collectively as Roche, $50.0 million in upfront and milestone payments
under our collaboration with CStone Pharmaceuticals, or CStone, a $25.0 million in upfront payment under our license
agreement with Clementia Pharmaceuticals, Inc., or Clementia, and $10.0 million in gross proceeds from a debt
financing. In addition, we received $308.2 million in estimated net proceeds from our January 2020 follow-on public
offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Since inception, we have incurred significant operating losses. Our net losses were $347.7 million, $236.6
million, and $148.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of
December 31, 2019, we had an accumulated deficit of $945.2 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 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’ equity 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, we will incur significant sales, marketing and outsourced - manufacturing
expenses in connection with the commercialization of any of our approved drugs. 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 substantial revenue from sales of AYVAKIT. We also have not obtained
marketing approval for AYVAKIT outside of the U.S. or for any other indications, and we have not obtained marketing
approval for any of our other drug candidates, which are in preclinical or clinical development stages. We do not expect
to generate significant revenue from our drug candidates unless and until we obtain marketing approval of, and begin to
sell, such 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;
continue to maintain and expand commercial manufacturing capabilities or make arrangements with
third-party manufacturers for clinical supply and commercial manufacturing;
establish and maintain a sales, marketing and distribution infrastructure to commercialize any
medicines for which we have or may obtain marketing approval, including AYVAKIT; and
achieve market acceptance of our drug candidates in the medical community and with third-party
payors.
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We expect to incur significant sales and marketing costs as we commercialize AYVAKIT and prepare to
commercialize our drug candidates, if approved. 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 avapritinib, pralsetinib
and fisogatinib through clinical development, and we plan to submit an investigational new drug, or IND, application for
BLU-263 for indolent SM in the first half of 2020. 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, including marketing approval for AYVAKIT for additional indications or in
additional geographies. In addition, we expect to incur additional significant commercialization expenses for AYVAKIT
and other drug candidates, if approved, related to drug sales, marketing, manufacturing and distribution to the extent that
such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators or licensors.
We may also need to raise additional funds sooner if we choose to pursue additional indications or geographies for any
of our approved drugs or 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, 2019, we had cash, cash equivalents and investments of $548.0 million. Based on our
current operating plans, we believe that our existing cash, cash equivalents and investments including the $308.2 million
in estimated net proceeds from our January 2020 follow-on public offering, together with anticipated product revenues
but excluding any additional potential option fees, milestone payments or other payments under our collaboration or
license agreements, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements
into the second half of 2022. 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 approved drugs and drug candidates;
the costs of securing manufacturing, packaging and labeling arrangements for development activities
and commercial production, including API, drug substance and drug product material for use in pre-
clinical studies, clinical trials, our compassionate use program and for use as commercial supply , as
applicable;
the costs, timing and outcome of regulatory review of marketing applications for our drug candidates,
including avapritinib for additional indications or in additional geographies;
the costs of maintaining, expanding or contracting for sales, marketing and distribution capabilities in
connection with commercialization of any of our approved drugs;
the success of our collaborations with Roche and CStone and our license agreement with Clementia, as
well as our ability to establish and maintain additional collaborations, partnerships or licenses on
favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under our
collaboration agreements with Roche and CStone or license agreement with Clementia, or any
collaboration, partnership or license 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;
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the extent to which we acquire or in-license other drugs, drug candidates or technologies and the terms
of any such arrangements;
the success of our current or future collaborations for the development of companion diagnostic tests;
the success of our commercialization efforts and market acceptance for AYVAKIT or any of our
future approved drugs;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims; and
the costs of continuing to expand our operations outside the U.S.
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 additional marketing approvals, including for avapritinib in additional indications or
geographies, and achieve sales for any of our drug candidates that receive marketing approval. In addition, our approved
drugs and drug candidates, if approved, may not achieve commercial success. 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.
Any additional fundraising efforts may divert our management from their day - to - day activities, which may
adversely affect our ability to develop and commercialize any of our approved drugs or 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 collaborations, partnerships, licensing arrangements or otherwise at an earlier stage than would be
desirable and we may be required to relinquish rights to some of our technologies, drugs 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 of our approved
drugs 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
primarily 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
collaborations with Roche and CStone and the license agreement with Clementia, which are limited in scope and
duration and subject to the achievement of milestones or royalties on sales of licensed products, if any. 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.
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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, drugs 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 drugs and drug
candidates that we would otherwise prefer to develop and market ourselves.
Risks Related to Drug Development and Regulatory Approval
If we are unable to advance our drug candidates to clinical development, obtain regulatory approval for our drug
candidates, including for avapritinib in additional indications or additional geographies, and ultimately
commercialize them, or experience significant delays in doing so, our business will be materially harmed.
We have only three drug candidates in clinical development: avapritinib, pralsetinib and fisogatinib. All of our
other drug candidates are currently in pre-clinical or earlier stages of development. We have invested significant efforts
and financial resources in the identification and pre-clinical development of kinase inhibitors, including the development
of our drugs and drug candidates. Our ability to generate drug revenues, if ever, will depend heavily on the successful
development and commercialization of our drugs and drug candidates. Each of our drug candidates, including avapritinib
for additional indications or in additional geographies, 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. Further clinical development, manufacturing and regulatory activities,
and substantial investment will be required before we may obtain marketing approval for avapritinib in additional
indications or geographies, if at all. 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, or to identify appropriate patients
for any drug candidates for which we obtain approval, we may be required or 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 PDGFRA D842V mutation, fisogatinib in order to identify HCC patients with FGFR4
pathway activation and pralsetinib in order to identify NSCLC patients with RET fusions. Companion diagnostic tests
are subject to regulation as medical devices and must themselves be cleared or approved for marketing by the FDA or
certain other foreign regulatory agencies before we may commercialize our drug candidates. The success of our
approved drugs and 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 clinical trials for
avapritinib, pralsetinib and fisogatinib;
successful completion of pre-clinical studies for our other drug candidates;
approval of INDs to commence future clinical trials for BLU-263 and our other drug candidates;
successful development of any companion diagnostic tests for use with our current or future drug
candidates;
receipt of regulatory approvals from applicable regulatory authorities;
establishing commercial manufacturing capabilities or making arrangements with third-parties for
clinical supply and commercial manufacturing, packaging and labeling and the receipt by such third-
party manufacturers of requisite approvals to supply commercial inventories of our approved drugs
and drug candidates;
obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our drugs and
drug candidates;
successful commercialization of our approved drugs and drug candidates, if and when approved,
whether alone or in collaboration with others;
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acceptance of our approved drugs and 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 our approved drugs and 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.
We do not know whether we will be able to develop any other 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.
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.
Avapritinib is in clinical development for additional indications and all of our other drug candidates are in pre-
clinical or clinical development. The risk of failure for preclinical and clinical development 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,
interim results of a clinical trial do not necessarily predict final results, and results for one indication may not be
predictive of the success in additional indications. 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 clinical trials and future clinical trials may not be successful.
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 our drug candidates, including avapritinib and
pralsetinib. We do not know whether any of our clinical trials for additional indications for avapritinib or for our drug
candidates will be completed on schedule, if at all, or will provide clinical data sufficient to support regulatory
submissions for or approval of such additional indications or drug candidates.
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
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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;
patients treated with our drug candidates may develop mutations that confer resistance to treatment,
which may limit the market opportunity for our drug candidates or prevent us from completing our
clinical trials, obtaining regulatory approval for or commercializing our drug candidates;
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;
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 may be greater than we anticipate;
the supply or quality of our drug candidates or other materials necessary to conduct our clinical trials
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 additional indications for our approved drugs or for our drug
candidates. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our
interpretation of data from clinical trials, or the FDA or any other regulatory authority may change the requirements for
approval even after it has reviewed and commented on the design for our clinical trials.
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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 AYVAKIT for additional indications or in additional
geographies, or be delayed in obtaining marketing approval for our drug candidates, if 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
fail to achieve market acceptance 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.
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, including avapritinib for
additional indications, 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 U.S. 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 AYVAKIT and 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.
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Because the target patient populations for AYVAKIT and our drug candidates are relatively small, it may be difficult
to successfully identify patients, which could delay enrollment for our trials.
We focus our research and development on treatments for cancer and rare diseases, including genomically
defined cancer and diseases driven by abnormal kinase activation. Because the target patient populations for AYVAKIT
and 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 PDGFRA D842V mutation, fisogatinib in order to identify HCC patients with FGFR4 pathway activation and
pralsetinib in order to identify NSCLC patients with RET fusions, and we may engage third parties to develop
companion diagnostic tests for use in some of our other current or future clinical trials. However, we may experience
delays in reaching, or fail to reach, agreement on acceptable terms to develop companion diagnostic tests with third
parties, and any third parties whom we engage to develop companion diagnostic tests may experience delays or may not
be successful in developing such companion diagnostic tests, furthering the difficulty in identifying patients for our
clinical trials. In addition, current commercially available diagnostic tests to identify appropriate patients for our clinical
trials or any approved drug candidates may become unavailable in the future.
Our inability to enroll a sufficient number of patients in our clinical trials, or to identify patients appropriate for
enrollment 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.
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, such drug candidates, and our ability to generate revenue will be materially impaired.
Our drug candidates and any companion diagnostic tests related to our approved drugs or drug candidates,
including the companion diagnostic tests that we are developing for AYVAKIT in order to identify GIST patients with
the PDGFRA D842V mutation, pralsetinib in order to identify NSCLC patients with RET fusions and fisogatinib in
order to identify HCC patients with FGFR4 pathway activation, 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 U.S. 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 clearance
or approval for any related companion diagnostic tests, including the companion diagnostic tests that we are developing
for avapritinib, pralsetinib and fisogatinib. Except for AYVAKIT, we have not received regulatory authorization to
market any of our drug candidates or related companion diagnostic tests from regulatory authorities in any jurisdiction,
and it is possible that these 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 U.S. 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
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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. For example, the FDA is reviewing our NDA for avapritinib for the treatment of
fourth-line GIST. As a part of the review, the FDA has requested top-line data from our VOYAGER trial. We expect to
provide the top-line data to the FDA early in the second quarter of 2020.
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;
• 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 U.S. or elsewhere;
the FDA or comparable foreign regulatory authorities may find deficiencies with or 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 other post-marketing requirements, 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
companion diagnostic tests related to our approved drugs and drug candidates, the commercial prospects for our
approved drugs or drug candidates may be harmed and our ability to generate revenues will be materially impaired.
Our drugs and 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 any of our approved drugs or 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
approved drugs and drug candidates. Results of our trials could reveal a high and unacceptable severity and prevalence
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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 drugs or 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 clinical trials or result in potential product liability claims. Any of these occurrences
may harm our business, financial condition and prospects significantly.
Further, our approved drugs and drug candidates could cause undesirable side effects in pre-clinical studies or
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 approved drugs or 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 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 drugs or drug candidates may only be
uncovered with a significantly larger number of patients exposed to the drugs or drug candidate. If we or others identify
undesirable side effects caused by any of our approved drugs or drug candidates (or any other similar drugs) after
marketing 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;
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 is distributed or administered, conduct additional
clinical trials or change the labeling of such drug;
•
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 from the marketplace;
• we could be sued and held liable for injury caused to individuals exposed to or taking our drugs and
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 drugs or drug candidates and could substantially increase the costs of commercializing our approved drugs and
drug candidates, if approved, and significantly impact our ability to successfully commercialize our approved drugs and
drug candidates and generate revenues.
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A breakthrough therapy designation by the FDA for our drug candidates, including avapritinib and pralsetinib, 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.
The FDA has granted breakthrough therapy designation to avapritinib for the treatment of patients with
unresectable or metastatic GIST harboring the PDGFRA D842V mutation, and the FDA has granted breakthrough
therapy designation to avapritinib for the treatment of advanced SM, including the subtypes of aggressive SM, SM with
an associated hematologic neoplasm and mast cell leukemia. In addition, the FDA has granted breakthrough therapy
designation to pralsetinib for the treatment of patients with RET-fusion positive NSCLC that has progressed following
platinum-based chemotherapy and to pralsetinib for the treatment of patients with RET mutation-positive MTC that
requires systemic treatment and for which there are no acceptable alternative treatments. 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.
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 other drugs 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 for our drug candidates.
The FDA has granted fast track designation to avapritinib for (i) the treatment of patients with unresectable or
metastatic GIST that progressed following treatment with imatinib and a second tyrosine kinase inhibitor and (ii) the
treatment of patients with unresectable or metastatic GIST with the PDGFRA 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
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
PDGFRA 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. 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 our drug candidates avapritinib, pralsetinib and fisogatinib 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.
The FDA has granted orphan drug designation to avapritinib for the treatment of GIST and the treatment of
mastocytosis, to pralsetinib for the treatment of RET-rearranged NSCLC, JAK1/2-positive NSCLC or TRKC-positive
NSCLC and to fisogatinib for the treatment of HCC. In addition, the European Commission has granted medicinal
product designation to avapritinib for the treatment of GIST and the treatment of mastocytosis. 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 U.S. 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
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of fewer than 200,000 individuals annually in the U.S., or a patient population greater than 200,000 in the U.S. where
there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S. In the
U.S., 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 medicinal product designation after
receiving the opinion of the European Medicines Agency, or EMA, Committee for Orphan Medicinal Products on an
orphan medicinal product designation application. Orphan medicinal product 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 drug 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 medicinal product 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
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 U.S. 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 U.S.
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 continue seek orphan drug designation for
our drug candidates, 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.
We will be subject to ongoing obligations and continued regulatory review of our approved drugs and drug
candidates, even if we receive regulatory approval, which may result in significant additional expense. In addition,
our drugs and 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
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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:
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restrictions on the marketing or manufacturing of the drug, withdrawal of the drug from the market,
“dear doctor” letters or 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.
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 be successful in clinical trials or 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.
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
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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.
Risks Related to Commercialization
We have limited experience as a commercial company and the marketing and sale of AYVAKIT or any future
approved drugs may be unsuccessful or less successful than anticipated.
In January 2020, the FDA approved AYVAKIT for the treatment of adults with unresectable or metastatic
GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V mutations. While we have initiated the
commercial launch of AYVAKIT in the U.S., we have limited experience as a commercial company and there is limited
information about our ability to successfully overcome many of the risks and uncertainties encountered by companies
commercializing drugs in the biopharmaceutical industry. Marketing applications for avapritinib for additional
indications and for pralsetinib are currently under review or planned in the U.S. and Europe. To execute our business
plan, in addition to successfully marketing and selling AYVAKIT, we will need to successfully:
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establish and maintain our relationships with healthcare providers who will be treating the patients
who may receive our drugs and any future drugs;
obtain adequate pricing and reimbursement for AYVAKIT and any future drugs;
gain regulatory acceptance for the development and commercialization of the drug candidates in our
pipeline;
develop and maintain successful strategic alliances; and
• manage our spending as costs and expenses increase due to clinical trials, marketing approvals, and
commercialization.
If we are unsuccessful in accomplishing these objectives, we may not be able to successfully develop drug
candidates, commercialize AYVAKIT or any future drugs, raise capital, expand our business or continue our operations.
The commercial success of AYVAKIT, and of any future drugs, will depend upon the degree of market acceptance by
physicians, patients, third-party payors and others in the medical community.
The commercial success of AYVAKIT and of any future drugs will depend in part on the medical community,
patients, and third-party or governmental payors. AYVAKIT and any other drugs that we may bring to the market may
not gain market acceptance by physicians, patients, third-party payors and others in the medical community. If these
drugs do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not
become profitable. The degree of market acceptance of AYVAKIT and of any future drugs will depend on a number of
factors, including:
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the potential efficacy and potential advantages over alternative treatments;
the prevalence and severity of any side effects, including any limitations or warnings contained in a
drug’s approved labeling;
relative convenience and ease of administration;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the length of time that patients who are prescribed our drugs remain on treatment;
the pricing of our drugs and any future drugs;
publicity concerning our current and future drugs, or competing products and treatments; and
sufficient third-party insurance coverage or reimbursement.
Even if a potential drug displays a favorable efficacy and safety profile in preclinical and clinical studies,
market acceptance of the drug will not be known until after it is launched. Our efforts to educate the medical community
and third-party payors on the benefits of our drugs may require significant resources and may never be successful. Our
efforts to educate the marketplace may require more resources than are required by the conventional technologies
marketed by our competitors. Any of these factors may cause AYVAKIT, or any future drugs, to be unsuccessful or less
successful than anticipated.
Although we have established our initial commercial infrastructure, we are continuing to build out our commercial
capabilities and have limited sales and distribution experience and limited capabilities for marketing and market
access. We expect to invest significant financial and management resources to establish these capabilities and
infrastructure to support commercial operations for the sale of AYVAKIT. If we are unable to establish these
additional commercial capabilities and infrastructure, we may be unable to generate sufficient revenue to sustain our
business.
Although we have established our initial commercial infrastructure, we are continuing to build out our
commercial capabilities and infrastructure and have limited sales and distribution experience and limited capabilities for
marketing and market access. To successfully commercialize AYVAKIT and any other drugs that may result from our
development programs, we will need to develop these capabilities and further expand our infrastructure to support
commercial operations in the U.S., Europe and other regions, either on our own or with others. We may be competing
with many companies that currently have extensive and well-funded marketing and sales operations. Without a
significant internal team or the support of a third party to perform these functions, including marketing and sales
functions, we may be unable to compete successfully against these more established companies.
We cannot be sure that we will be able to recruit, hire and retain a sufficient number of sales representatives or
that they will be effective at promoting our drugs. In addition, we will need to commit significant additional
management and other resources to maintain and grow our sales organization. We may not be able to achieve the
necessary development and growth in a cost-effective manner or realize a positive return on our investment. We will also
have to compete with other companies to recruit, hire, train and retain sales and marketing personnel. Factors that may
inhibit our efforts to commercialize our drugs include:
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our inability to recruit, train and retain adequate numbers of sales and marketing personnel;
the inability of sales personnel to obtain access to or to persuade adequate numbers of physicians to
prescribe AYVAKIT; and
unforeseen costs and expenses associated with maintaining an independent sales and marketing
organization.
In the event that we are unable to effectively deploy our sales organization or distribution strategy on a timely
and efficient basis, if at all, the commercialization of our drug candidates could be delayed which would negatively
impact our ability to generate product revenues.
Our reliance on single-source third-party suppliers could harm our ability to commercialize AYVAKIT or any other
drug candidates that may be approved in the future.
We do not currently own or operate manufacturing facilities for the production of AYVAKIT or any other drug
candidates that may be approved in the future. We rely on single-source third-party suppliers to manufacture and supply
AYVAKIT and expect to initially rely on single-source third-party supplies for commercial manufacture and supply of
pralsetinib, if approved, which may not be able to produce sufficient inventory to meet commercial demand in a timely
manner, or at all. Our third-party suppliers may not be required to provide us with any guaranteed minimum production
levels or have dedicated capacity for our drugs. As a result, there can be no assurances that we will be able to obtain
sufficient quantities of AYVAKIT or any other drug candidates that may be approved in the future, which could have a
material adverse effect on our business as a whole.
The incidence and prevalence for target patient populations of our approved drugs and drug candidates have not
been established with precision. If the market opportunities for our approved drugs or 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 GIST, SM, RET-altered NSCLC and MTC, and HCC are unknown.
Our projections of the number of people who have these diseases, the frequency of the genetic alterations targeted by our
drug candidates and 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 U.S., France, Germany, Italy, Spain, the United
Kingdom and Japan, or the Major Markets, there are approximately: 75,000 patients with SM, including 3,750 patients
with advanced SM and 71,250 patients with indolent SM or smoldering SM (regardless of severity of symptoms); 500
first-line patients with PDGFRA D842V mutant GIST (including resectable, metastatic and unresectable GIST); 7,500
second-line patients with GIST, including approximately 75%-80% of second-line patients with GIST who do not have a
KIT V654A or T670I mutation; 7,400 third-line and later patients with GIST (regardless of alteration); 8,900 first- and
second-line patients with RET-altered NSCLC; 1,300 patients with MTC (regardless of line of therapy or alteration); and
25,900 first- and second-line patients with FGFR4-activated HCC.
The total addressable market opportunity for avapritinib for the treatment of patients with GIST and SM,
pralsetinib for the treatment of patients with RET-altered NSCLC and MTC and fisogatinib for the treatment of patients
with advanced HCC will ultimately depend upon, among other things, the diagnosis criteria included in the final label
for our current and future drugs 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, patients treated with our drugs and drug candidates may develop mutations that confer
resistance to treatment 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 drugs and current clinical-stage drug candidates, and we will face competition with respect to any drugs and 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. In
addition, if avapritinib is approved for advanced SM or if avapritinib or BLU-263 are approved for indolent SM, they
may face competition from other drug candidates in development for these indications, including drug candidates being
developed by AB Science S.A. and Allakos Inc.
If avapritinib receives marketing approval for third-line GIST, it will face competition from Bayer AG’s
regorafenib, and if avapritinib receives marketing approval for second-line GIST, it will face competition from Pfizer
Inc.’s sunitinib. In addition, AYVAKIT may face competition from drug candidates in development for GIST, including
PDGFRA D842V mutant GIST, including those being developed 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, Exelixis, Inc., Ningbo Tai Kang Medical Technology Co. Ltd. and
Xencor, Inc.
If pralsetinib receives marketing approval for patients with RET-driven cancers, it may face competition from
other drug candidates in development, including those being developed by AstraZeneca plc, Boston Pharmaceuticals,
Inc., Eisai Inc., Exelixis, Inc., GlaxoSmithKline plc, Loxo Oncology, Inc., a wholly-owned subsidiary of Eli Lilly and
Company, Mirati Therapeutics, Inc., Novartis AG, Pfizer Inc. Roche, Stemline Therapeutics, Inc., and Turning Point
Therapeutics, Inc., as well as several approved multi-kinase inhibitors with RET activity being evaluated in clinical
trials, including alectinib, apatinib, cabozantinib, dovitinib, lenvatinib, sorafenib, sunitinib and vandetinib.
If fisogatinib receives marketing approval for patients with FGFR4-activated HCC, it will face competition
from Bristol-Myers Squibb Company’s nivolumab and Merck & Co., Inc.’s pembrolizumab, immune checkpoint
inhibitors approved by the FDA for the treatment of HCC, as well as sorafenib, cabozantinib, regorafenib and lenvatinib,
multi-kinase inhibitors approved for the treatment of HCC. In addition, fisogatinib 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.
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
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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.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization
of any of our approved drugs or drug candidates that we may develop.
We face an inherent risk of product liability exposure related to the testing of our approved drugs and drug
candidates in human clinical trials and use of our drug candidates through compassionate use programs, and an even
greater risk in connection with our commercialization of our current and future drugs. If we cannot successfully defend
ourselves against claims that any of our approved drugs or drug candidates caused injuries, we could incur substantial
liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any of our approved drugs or drug candidates that we may develop and
commercialize;
injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
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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 of approved drugs or 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 may need to further increase our insurance coverage as we begin additional clinical
trials or if we successfully commercialize additional drug candidates. 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
drugs and drug candidates, or experience significant delays in doing so we may not realize the full commercial
potential of our drugs and drug candidates.
Because we are focused on precision medicine, in which predictive biomarkers will be used to identify the right
patients for our drugs and 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 AYVAKIT in order to identify GIST patients with the PDGFRA D842V mutation,
fisogatinib in order to identify HCC patients with FGFR4 pathway activation and pralsetinib in order to identify NSCLC
patients with RET fusions. If we decide to initiate a planned Phase 3 clinical trial in second-line GIST, prior to initiation
we will need to enter into an agreement with a third party to develop a companion diagnostic test for avapritinib in order
to select patients with PDGFRA- and KIT-driven second-line GIST who do not test positive for the KIT V654A or
T670I mutations. 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 approved drugs or drug candidates that
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receive marketing approval. In addition, current commercially available diagnostic tests may become unavailable in the
future. Companion diagnostic tests are subject to regulation by the FDA and similar regulatory authorities outside the
U.S. as medical devices and require separate regulatory clearance or 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 clearance or approval for and commercialize the companion diagnostic tests for
avapritinib, pralsetinib and fisogatinib, and we expect to rely in whole or in part on third parties to design, manufacture,
obtain regulatory clearance or approval for and commercialize any other companion diagnostic tests for our drugs and
drug candidates. We and our collaborators may encounter difficulties in developing and obtaining clearance or 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;
• may not pursue commercialization of a companion diagnostic test even if it receives any required
regulatory clearances or 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 clearance or 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 drugs and drug candidates, or experience delays in doing so:
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the development of our approved drugs and 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;
regulatory authorities may impose post-marketing requirements regarding the development and
commercialization of companion diagnostic tests for our drugs and drug candidates; and
• we may not realize the full commercial potential of any of our approved drugs or 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 current and future drugs. 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 approved drugs
and 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 drugs and drug candidates or do so on commercially
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reasonable terms, which could adversely affect and/or delay the development or commercialization of our drugs and
drug candidates.
Even if we are able to commercialize any of our approved drugs or drug candidates, if approved, such drug or drug
candidate 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. In the U.S. and markets in other countries, patients generally
rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and
reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is
critical to new product acceptance. Our ability to successfully commercialize our products will depend in part on the
extent to which coverage and adequate reimbursement for these products and related treatments will be available from
government health administration authorities, private health insurers and other organizations. Government authorities
and third-party payors, such as private health insurers and health maintenance organizations, decide which medications
they will pay for and establish reimbursement levels. The availability of coverage and extent of reimbursement by
governmental and private payors is essential for most patients to be able to afford treatments. Sales of these or other
products that we may identify will depend substantially, both domestically and abroad, on the extent to which the costs
of our products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management
organizations, or reimbursed by government health administration authorities, private health coverage insurers and other
third-party payors. If coverage and adequate reimbursement is not available, or is available only to limited levels, we
may not be able to successfully commercialize our products. Even if coverage is provided, the approved reimbursement
amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our
investment. 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
U.S. 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 U.S. 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
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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 U.S., 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 (increased to 70% by the Bipartisan Budget Act of 2018, effective January 1, 2019) 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 U.S. 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 2029 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 and Medicaid Services, 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 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.
Since its enactment, some of the provisions of the Affordable Care Act have yet to be fully implemented, while
certain provisions have been subject to judicial, congressional, and executive challenges. Since January 2017, President
Trump has signed two executive orders and other directives designed to delay the implementation of certain provisions
of the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all
or part of the Affordable Care Act. While Congress has not passed repeal legislation to date, it has enacted laws that
modify certain provisions of the Affordable Care Act. The Tax Cuts and Jobs Act of 2017, or TCJA, included a
provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the
Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is
commonly referred to as the “individual mandate”. On December 14, 2018, a U.S. District Court judge in the Northern
District of Texas ruled that the individual mandate portion of the Affordable Care Act is an essential and inseverable
feature of the Affordable Care Act, and therefore because the mandate was repealed as part of the TCJA, the remaining
provisions of the Affordable Care Act are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of
Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its
earlier invalidation of the full Affordable Care Act. Pending review, the Affordable Care Act remains in effect, but it is
unclear at this time what effect the latest ruling will have on the status of the Affordable Care Act. Litigation and
legislation over the Affordable Care Act are likely to continue, with unpredictable and uncertain results. We will
continue to evaluate the effect that the Affordable Care Act and its possible repeal and replacement has on our business.
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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. On June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the
federal government was not required to pay more than $12 billion in Affordable Care Act risk corridor payments to
third-party payors who argued were owed to them. On December 10, 2019, the U.S. Supreme Court heard arguments in
Moda Health Plan, Inc. v. United States, which will determine whether the government must make risk corridor
payments. The U.S. Supreme Court’s decision will be released in the coming months, but we cannot predict how the
U.S. Supreme Court will rule. The effects of this gap in reimbursement on third-party payors, the viability of the
Affordable Care Act marketplace, providers, and potentially our business, are not yet known.
Moreover, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal
year 2018 that delayed the implementation of certain Affordable Care Act-mandated fees, including the so called
“Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health
insurance providers based on market share. However, on December 20, 2019, President Trump signed into law the
Further Consolidated Appropriations Act (H.R. 1865), which repeals the Cadillac tax, the health insurance provider tax,
and the medical device excise tax. In July 2018, CMS published a final rule permitting further collections and payments
to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care
Act risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS
uses to determine this risk adjustment. In addition, CMS published 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 has been increasing legislative and enforcement interest in the U.S. with respect to drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation
designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under
Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year
2020 contains further drug price control measures that could be enacted during the budget process or in other future
legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs
under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for
generic drugs for low-income patients. While some proposed measures may require additional authorization to become
effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or
administrative measures to control drug costs. For example, on September 25, 2019, the Senate Finance Committee
introduced the Prescription Drug Pricing Reduction Action of 2019, a bill intended to reduce Medicare and Medicaid
prescription drug prices. The proposed legislation would restructure the Part D benefit, modify payment methodologies
for certain drugs, and impose an inflation cap on drug price increases. An even more restrictive bill, the Lower Drug
Costs Now Act of 2019, was introduced in the House of Representatives on September 19, 2019, and would require the
Department of Health and Human Services, or HHS, to directly negotiate drug prices with manufacturers. The Lower
Drugs Costs Now Act of 2019 has passed out of the House and was delivered to the Senate on December 16, 2019.
However, it is unclear whether either of these bills will make it through both chambers and be signed into law, and if
either is enacted, what effect it would have on our business.
Additionally, the Trump administration released a “blueprint” to lower drug prices and reduce out of pocket
costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating
power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and
reduce the out of pocket costs of drug products paid by consumers. HHS has already started the process of soliciting
feedback on some of these measures and, at the same time, is immediately implementing others under its existing
authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using
step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective
January 1, 2019. Congress and the Trump administration will likely continue to consider subsequent legislation and
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
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plan to continue to evaluate the effect that the Affordable Care Act and its possible repeal and replacement may have on
our business.
In addition, individual states have also become increasingly active in passing legislation and implementing
regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some
cases, to encourage importation from other countries and bulk purchasing.
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 current and future drugs. 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.
Beyond challenges to the Affordable Care Act, other legislative measures have also been enacted that may
impose additional pricing and product development pressures on our business. For example, on May 30, 2018, the Right
to Try Act, was signed into law. Among other things, this law provides a federal framework for certain patients to access
certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing
investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in
clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation
for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the
manufacturer must develop an internal policy and respond to patient requests according to that policy. We expect that
additional foreign, federal and state healthcare reform measures will be adopted in the future, any of which could limit
the amounts that federal and state governments will pay for healthcare products and services, which could result in
limited coverage and reimbursement and reduced demand for our drugs and drug candidates, if approved, or additional
pricing pressures.
Additionally, on December 18, 2019, President Trump, the U.S. Department of Health and Human Services,
and the FDA issued a notice of proposed rulemaking that, if finalized, would allow for the importation of certain
prescription drugs from Canada. FDA also issued a Draft Guidance document outlining a potential pathway for
manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug that was originally
intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The regulatory and
market implications of the notice of proposed rulemaking and Draft Guidance are unknown at this time, but legislation,
regulations or policies allowing the reimportation of drugs, if enacted and implemented, could decrease the price we
receive for our products and adversely affect our future revenues and prospects for 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 drug candidates, restrict or regulate
post-approval activities and affect our ability to commercialize any of our approved drugs or drug candidates 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 commercialization of our approved drugs and drug candidates.
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If, in the future, we are unable to maintain sales and marketing capabilities or enter into agreements with third
parties to sell and market our drugs and drug candidates, we may not be successful in commercializing our drugs and
drug candidates if and when they are approved, and we may not be able to generate any revenue.
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.
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
current or future drugs ourselves. In addition, we may not be successful in entering into arrangements with third parties
to sell and market our current and future drugs 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 drugs 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 drugs and drug
candidates, if approved. 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.
We are 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 of our approved drugs and
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 drugs and 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, overtly or covertly, 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, 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. Manufacturers can be held liable under the False Claims Act even when they do
not submit claims directly to government payors if they are deemed to “cause” the submission of false
or fraudulent claims;
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 regardless of the
payor (e.g., public or private), 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
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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;
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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. Effective January 1, 2022, these reporting obligations will extend to include transfers
of value made to certain non-physician providers such as physician assistants and nurse practitioners;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of
2009, or HITECH, 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. HITECH also
created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties
directly applicable to business associates, 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
attorneys’ fees and costs associated with pursuing federal civil actions;
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the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing, or
covering up a material fact or making any materially false statement in connection with the delivery of
or payment for 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);
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.
In the U.S., to help patients afford our drug, we have a patient assistance program. Patient assistance programs
have received some negative publicity related to allegations regarding their use to promote branded pharmaceutical
products over other less costly alternatives. In recent years, pharmaceutical manufacturers were named in class action
lawsuits challenging the legality of their patient assistance programs under a variety of federal and state laws. In
addition, patient assistance programs have become the subject of enhanced government and regulatory scrutiny. If we or
our vendors are deemed to fail to comply with relevant laws, regulations or evolving government guidance in the
operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative
sanctions or enforcement actions. We cannot ensure that our compliance controls, policies and procedures will be
sufficient to protect against acts of our employees, business partners or vendors that may violate the laws or regulations
of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government
investigation could impact our business practices, harm our reputation, divert the attention of management, increase our
expenses and reduce the availability of assistance to our patients.
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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, manufacturing, commercial sales,
pricing and distribution of our drug candidates, and we cannot predict success in these jurisdictions. If we seek to
develop our drug candidates or 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, including the European General Data Protection Regulation 2016/679, commonly
referred to as GDPR;
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.
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Governments outside the U.S. 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
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 licensing arrangements, 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 commercialization of any of our approved drugs and drug candidates
will require substantial additional cash to fund expenses. We may decide to collaborate with additional pharmaceutical
and biotechnology companies for the development and commercialization of certain approved drugs or drug candidates
or to license the development and commercialization rights of certain approved drugs or drug candidates to third parties.
We face significant competition in seeking appropriate collaborators and licensing partners. Whether we reach a
definitive agreement for a collaboration or license will depend, among other things, upon our assessment of the
collaborator’s or licensing partner’s resources and expertise, the terms and conditions of the proposed agreement and the
proposed partner’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 U.S., the potential market for the
subject drug or drug candidate, the costs and complexities of manufacturing and delivering such drug or 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 or licensing partner may also consider alternative drug candidates or
technologies for similar indications that may be available to collaborate on and whether such a collaboration or licensing
arrangement could be more attractive than the one with us for our drug candidate. The terms of any additional
collaborations, licenses or other arrangements that we may establish may not be favorable to us. We may also be
restricted under our collaboration agreements with Roche and CStone and our license agreement with Clementia from
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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 and licensing arrangements 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 or license, 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 collaborations with Roche and CStone and our license agreement with Clementia, as well as
any future collaborations or licenses that we enter into, may not be successful. The success of these arrangements will
depend heavily on the efforts and activities of our collaborators and licensing partners. 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. Licensors generally have sole discretion in determining the efforts and resources that they
will apply to the licensed products. Collaborations and licenses 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 progressiva for convenience following a
strategic review by Alexion of its research and development portfolio. Any termination or expiration of our collaboration
agreements with Roche and CStone, our license agreement with Clementia or any future collaboration or license
agreement could adversely affect us financially or harm our business reputation.
We rely on third parties to conduct our clinical trials for our approved drugs and 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 approved drugs and 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
approved drugs and drug candidates. We rely heavily on these parties for execution of clinical trials for our drugs and
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
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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 approved drugs and 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 approved drugs for additional indications and 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.
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 for additional indications or our drug candidates. As a
result, we believe that our financial results and the commercial prospects for our drugs or 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 for the manufacture of AYVAKIT for commercialization. This reliance on third parties increases the risk
that we will not have sufficient quantities of our drugs or drug candidates 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 current
and future drugs. This reliance on third parties increases the risk that we will not have sufficient quantities of our drugs
or drug candidates 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 drugs and 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 drugs and drug candidates. If our contract
manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory
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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 drugs and 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 drugs and drug
candidates.
We do not have any long-term supply agreements with our contract manufacturers, and we purchase our
required drug supply, including the API, drug product and drug substance used in our 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.
Any of our approved drugs and drug candidates that we may develop may compete with other approved drugs
and drug candidates 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.
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 approved
drugs and 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 drugs or drug candidates
could result in significant delays or gaps in availability of such drugs or drug candidates 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 API, drug substance and drug product used in avapritinib
and pralsetinib are our sole source of supply, and the loss of any of these suppliers could significantly harm our
business.
The API, drug substance and drug product used in avapritinib and pralsetinib 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 substance and drug product 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
avapritinib and pralsetinib, if any of our suppliers ceases its operations for any reason or is unable or unwilling to supply
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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 substance and drug product 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 substance and drug product 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 substance and drug product used in our drug candidates,
any interruption or delay in the supply of components or materials, or our inability to obtain such API, drug substance
and drug product 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.
Certain of our research and development, clinical trials and manufacturing and supply for certain raw materials used
in AYVAKIT and our drug candidates takes place in China through third-party CROs, collaborators or
manufacturers. A significant disruption in the operation of those CROs, collaborators or manufacturers, could
materially adversely affect our business, financial condition and results of operations.
We have relied on certain third parties located in China to manufacture and supply certain raw materials used in
AYVAKIT and our drug candidates, and we expect to continue to use such third party manufacturers for such purposes.
In addition, certain of our drug candidates are being evaluated at clinical trial sites in China under our collaboration with
CStone and through CROs located in China. A natural disaster, epidemic or pandemic disease outbreaks, including the
recent 2019 novel coronavirus outbreak, trade war, political unrest or other events could disrupt the business or
operations of CROs, collaborators, manufacturers or other third parties with whom we conduct business now or in the
future. Any disruption in China that significantly impacts such third parties, including services provided by CROs for
our research and development programs, clinical trial operations conducted by CROs or our collaborators, or our
manufacturers ability to produce raw materials in adequate quantities to meet our needs could impair our ability to
operate our business on a day-to-day basis and impede, delay, limit or prevent the research, development or
commercialization of our current and future approved drugs or drug candidates. In addition, for any activities conducted
in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in
the policies of the U.S. or Chinese governments, political unrest or unstable economic conditions in China, and we may
be exposed to fluctuations in the value of the local currency in China for goods and services. Our costs for any of these
services or activities could also increase as a result of future appreciation of the local currency in China or increased
labor costs if the demand for skilled laborers increases in China and the availability of skilled labor declines in China.
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 U.S. and other countries for our drugs and drug candidates, including avapritinib and
pralsetinib, 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 U.S. and abroad related to our proprietary compounds, technologies, inventions and
improvements that are important to the development and implementation of our business. We also rely on copyright,
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 the composition of matter for avapritinib, pralsetinib,
fisogatinib and BLU-263. We also own applications relating to composition of matter for KIT and PDGFRA inhibitors
with multiple compound families, composition of matter for FGFR4 inhibitors with multiple compound families, and
composition of matter for inhibitors of RET, including predicted RET resistance mutations, as well as methods of use for
these novel compounds. The issued U.S. patent directed to avapritinib composition of matter has a statutory expiration
date in 2034, the issued U.S. patent directed to pralsetinib composition of matter has a statutory expiration date in 2036,
and the issued U.S. patent directed to fisogatinib composition of matter has a statutory expiration date in 2034. Patent
term adjustments or patent term extensions could result in later expiration dates.
As of January 31, 2020, we owned nine issued U.S. patents, 10 issued foreign patents, including one European
patent validated in 38 countries, two pending U.S. non-provisional patent applications, seven pending U.S. provisional
patent applications, one pending PCT international application and 21 pending foreign patent applications directed to our
KIT and PDGFRA program, including avapritinib and BLU-263. The patents that have issued or will issue covering our
KIT and PDGFRA program will have a statutory expiration date between 2034 and 2040. Patent term adjustments or
patent term extensions could result in later expiration dates for avapritinib or BLU-263.
As of January 31, 2020, we owned five issued U.S. patents, four pending U.S. non-provisional patent
applications, two pending PCT international applications and 30 pending foreign patent applications directed to our RET
program, including pralsetinib. The patents that have issued or will issue covering our RET program will have a
statutory expiration date between 2036 and 2039. Patent term adjustments or patent term extensions could result in later
expiration dates.
As of January 31, 2020, we owned eight issued U.S. patents, three pending U.S. non-provisional patent
applications, one pending PCT international application, 22 issued foreign patents and 31 pending foreign patent
applications directed to our FGFR4 program, including fisogatinib. The patents that have issued or will issue covering
our FGFR4 program will have a statutory expiration date between 2033 and 2039. Patent term adjustments or patent
term extensions could result in later expiration dates.
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
January 31, 2020, we owned six issued U.S. patents, seven pending U.S. non-provisional patent applications, seven
pending European Union patent applications and five issued European patents directed to this technology. Any U.S. or
ex-U.S. patent issuing from the pending applications directed to this technology, 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 any of our approved drugs and 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, pralsetinib, fisogatinib or BLU-263. In addition, the laws of foreign countries may not protect our rights to
the same extent as the laws of the U.S. Furthermore, patents have a limited lifespan. In the U.S., 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 drugs and drug candidates,
including generic versions of such drugs or drug candidates.
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
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patent applications in the U.S. 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 patents owned by third parties that have generic
composition of matter, method of inhibition and method of treatment claims that may cover fisogatinib or generic
method of treatment claims that may cover pralsetinib. If the claims of any of these third-party patents are asserted
against us, we do not believe fisogatinib, pralsetinib 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 U.S. and abroad could uphold
the validity of any such patents. If we were to challenge the validity of any issued U.S. patent in court, we would need to
overcome a statutory presumption of validity that attaches to every U.S. 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. 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
U.S. 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, consultants, advisors, and other
third parties who have access to our proprietary know-how 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
could limit the duration of the patent protection covering our technology, drugs and drug candidates. Such challenges
may also result in our inability to manufacture or commercialize our drugs or drug candidates, if approved, without
infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent
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applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future drugs and 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 drugs and 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 drugs and drug
candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our drugs or
drug candidates, if approved, 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 current and future drugs 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
drugs, 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 patents owned by third parties that have generic
composition of matter, method of inhibition and method of treatment claims that may cover fisogatinib or generic
method of treatment claims that may cover pralsetinib. If the claims of any of these third-party patents are asserted
against us, we do not believe fisogatinib, pralsetinib 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 U.S. and abroad could uphold
the validity of any such patents. If we were to challenge the validity of any issued U.S. patent in court, we would need to
overcome a statutory presumption of validity that attaches to every U.S. 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 drugs and drug candidates. If a patent holder believes any of our approved drugs or drug
candidate infringes on its patent, the patent holder may sue us even if we have received patent protection for our drugs,
drug candidates and 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, drugs 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 current and future
drugs 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 U.S., 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 any of our approved drugs or drug candidates, we would lose at least part, and perhaps all, of the patent
protection covering such drug or 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
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lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
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 drugs or
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 drugs and 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 U.S. 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 U.S. 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 drugs and 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 drugs and 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 U.S. and other jurisdictions could diminish the value of patents in general, thereby
impairing our ability to protect our drugs and 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 U.S. 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 U.S. 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 U.S.
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 drugs and 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 drugs and drug candidates, if approved. 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 drugs and drug candidates, if approved, 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,
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Marion Dorsch, our Chief Scientific Officer, Kathryn Haviland, our Chief Operating Officer, Michael Landsittel, our
Chief Financial Officer, Tracey McCain, our Chief Legal and Compliance Officer, Debra Durso-Bumpus, our Chief
People Officer, Christopher Murray, our Senior Vice President of Technical Operations, and Christina Rossi, our Chief
Commercial Officer, 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. In addition, insurance coverage is increasingly expensive, including with respect
to directors and officers liability insurance, or D&O insurance. We may not be able to maintain D&O insurance at a
reasonable cost or in an amount adequate to satisfy any liability that may arise. An inability to secure and maintain D&O
insurance may make it difficult for us to retain and attract talented and skilled directors and officers to serve our
company, which could adversely affect our business. 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, regulatory, manufacturing and sales and marketing personnel is 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 January 31, 2020, we had 383 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. 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
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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.
On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union,
commonly referred to as Brexit. Thereafter, on March 29, 2017, the country formally notified the European Union of its
intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The United Kingdom formally left the European
Union on January 31, 2020. A transition period began on February 1, 2020, during which European Union
pharmaceutical law remains applicable to the United Kingdom. This transition period is due to end on December 31,
2020. Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and
efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of
pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the
future regulatory regime which applies to drugs and the approval of drug candidates in the United Kingdom. It remains
to be seen how, if at all, Brexit will impact regulatory requirements for product candidates and products in the United
Kingdom. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the
withdrawal of the United Kingdom from the European Union, especially in the case of a “hard” Brexit, would have and
how such withdrawal would affect us. 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.
For example, Brexit could result in the United Kingdom or the European Union significantly altering its
regulations affecting the clearance or approval of our drug candidates that are developed in the United Kingdom. Any
new regulations could add time and expense to the conduct of our business, as well as the process by which our drug
candidates receive regulatory approval in the United Kingdom, the European Union and elsewhere. In addition, the
announcement of Brexit and the withdrawal of the United Kingdom from the European Union have had and may
continue to have a material adverse effect on global economic conditions and the stability of global financial markets,
and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in
certain financial markets. Any of these effects of Brexit, among others, could adversely affect our business, our results of
operations, liquidity and financial condition.
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 clinical trial sites or 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 collaborators, service providers, contractors or
consultants, may fail or suffer security breaches, which could result in a material disruption of our drugs’ and drug
candidates’ development programs and have a material adverse effect on our reputation, business, financial
condition or results of operations.
Our internal computer systems and those of our current or future third-party collaborators, service providers,
contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. Attacks on information technology systems are increasing
in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly
sophisticated and organized groups and individuals with a wide range of motives and expertise. In addition to extracting
sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service
attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and
availability of information. The prevalent use of mobile devices also increases the risk of data security incidents. While
we have not experienced any material system failure, accident or security breach to date, if such an event were to occur
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and cause interruptions in our operations or the operations of third-party collaborators, service providers, contractors and
consultants, it could result in a material disruption of our drugs’ and drug candidates’ development programs and
significant reputational, financial, legal, regulatory, business or operational harm. For example, the loss of clinical trial
data for our drugs or 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. In addition, our liability insurance may not be sufficient in type or amount to
cover us against claims related to security breaches, cyberattacks and other related breaches.
Any failure or perceived failure by us or any third-party collaborators, service providers, contractors or
consultants to comply with our privacy, confidentiality, data security or similar obligations to third parties, or any data
security incidents or other security breaches that result in the unauthorized access, release or transfer of sensitive
information, including physician data, patient data, or any personally identifiable information, may result in
governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause
third parties to lose trust in us or could result in claims by third parties asserting that we have breached our privacy,
confidentiality, data security or similar obligations, any of which could have a material adverse effect on our reputation,
business, financial condition or results of operations. Moreover, data security incidents and other security breaches can
be difficult to detect, and any delay in identifying them may lead to increased harm. While we have implemented data
security measures intended to protect our information technology systems and infrastructure, there can be no assurance
that such measures will successfully prevent service interruptions or data security incidents.
Interruptions in the availability of server systems or communications with Internet or cloud-based services, or failure
to maintain the security, confidentiality, accessibility or integrity of data stored on such systems, could harm our
business.
We rely upon a variety of Internet service providers, third-party hosting facilities and cloud computing platform
providers to support our business. Failure to maintain the security, confidentiality, accessibility or integrity of data stored
on such systems could damage our reputation in the market, cause us to lose revenue or market share, increase our
service costs, cause us to incur substantial costs, subject us to liability for damages and/or fines and divert our resources
from other tasks, any one of which could materially adversely affect our business, financial condition, results of
operations and prospects. Any damage to, or failure of, such systems, or communications to and between such systems,
could result in interruptions in our operations. If our security measures or those of our third-party data center hosting
facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is
obtained to our data or our information technology systems, we may incur significant legal and financial exposure and
liabilities.
We do not have control over the operations of the facilities of our cloud service providers and our third party
providers may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks,
power outages and similar events or acts of misconduct. In addition, any changes in our cloud service providers’ service
levels may adversely affect our ability to meet our requirements and operate our business.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or
inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a
material adverse effect on our business, financial condition or results of operations.
Privacy and data security have become significant issues in the U.S., Europe and in many other jurisdictions
where we conduct or may in the future conduct our operations. The regulatory framework for the collection, use,
safeguarding, sharing and transfer of information worldwide is rapidly evolving and is likely to remain uncertain for the
foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and
privacy frameworks with which we must comply. On May 25, 2018, the European General Data Protection Regulation
2016/679, which is commonly referred to as GDPR, took effect. The GDPR applies to any company established in the
European Union as well as any company outside the European Union that collects or otherwise processes personal data
in connection with the offering goods or services to individuals in the European Union or the monitoring of their
behavior. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for
example, expanded disclosures about how personal information is to be used, limitations on retention of information,
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mandatory data breach notification requirements and onerous new obligations on services providers. The GDPR imposes
additional obligations and risk upon our business and substantially increase the penalties to which we could be subject in
the event of any non-compliance, including fines of up to €20 million or 4% of total worldwide annual turnover,
whichever is higher. Given the breadth and depth of changes in data protection obligations, preparing for and complying
with the GDPR requirements has required and will continue to require significant time, resources and a review of our
technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or
consultants that process or transfer personal data collected in the European Union. If enacted, we will be subject to the
EU ePrivacy Regulation, which is a proposed regulation of privacy and electronic communications. In addition, we will
be subject to the California Consumer Privacy Act, which took effect on January 1, 2020 and imposes sweeping privacy
and security obligations on many companies doing business in California and provides for substantial fines for non-
compliance and, in some cases, a private right of action to consumers who are victims of data breaches involving their
unredacted or unencrypted personal information. While there is currently an exception for protected health information
that is subject to HIPAA and clinical trial regulations, as currently written, the CCPA may impact our business activities.
The California Attorney General has proposed draft regulations (which have not been finalized to date) and will
commence enforcement actions against violators beginning July 1, 2020. The GDPR and other changes in laws or
regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other
personal information from our clinical trials, could lead to government enforcement actions and significant penalties
against us and could have a material adverse effect on our business, financial condition or results of operations.
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 U.S. 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 or in-license businesses or drugs, or form strategic alliances, in the future, and we may not realize
the benefits of such acquisitions.
We may acquire or in-license 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.
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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, 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.
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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 may in the future 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 $109.00 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 13,
2020. 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:
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the success of commercialization of our drugs and drug candidates, if approved;
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 U.S. 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;
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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
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selling shares and may impair our ability to acquire other companies or technologies by using our shares as
consideration.
If equity research analysts 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. 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 acquiror 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
87
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
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.
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 costlier.
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. 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
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, 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.
88
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, 2019, we had federal net operating loss carryforwards of
approximately $802.1 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. On September 19, 2018, we entered into an amendment to the lease agreement to expand
the rentable square footage from approximately 99,833 square feet to approximately 139,216 square feet. The initial term
of the lease with respect to the expansion premises commenced on March 1, 2019 and will expire on November 30,
2029, unless terminated sooner. Pursuant to the lease amendment, the rent commencement date for the expansion
premises was July 1, 2019.
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 provides us with an option to extend the lease for five
additional years. In the first quarter of 2018, we fully subleased these premises 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.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
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.
Holders
As of January 31, 2020, there were approximately 16 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. 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, 2019. 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.
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
$500.00
$450.00
$400.00
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
Blueprint Medicines Corporation
Nasdaq Composite Index
Nasdaq Biotechnology Index
90
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, 2019, 2018 and 2017 and the
consolidated balance sheet data as of December 31, 2019 and 2018 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, 2016 and 2015 and the consolidated balance sheet data as of December 31, 2017, 2016
and 2015 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 notes thereto. Our historical results for any prior period are not necessarily indicative of
results to be expected in any future period.
2019
Year Ended December 31,
2016
2017
2018
(in thousands, except per share data)
2015
Statements of Operations Data:
Collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . $ 66,512 $
Operating expenses:
44,521 $ 21,426 $ 27,772 $ 11,400
Research and development . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
331,450
96,388
427,838
243,621
47,928
291,549
144,687
27,986
172,673
81,131
19,218
100,349
48,588
14,456
63,044
10,566
(180)
10,386
Interest income (expense), net . . . . . . . . . . . . . .
(581)
13,732
Other income (expense), net . . . . . . . . . . . . . . . .
(544)
(100)
Total other income (expense) . . . . . . . . . . . . . . . . .
(1,125)
13,632
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (347,694) $ (236,642) $ (148,119) $ (72,495) $ (52,769)
(3,153)
Convertible preferred stock dividends . . . . . . . . . .
Net loss applicable to common stockholders . . . . . $ (347,694) $ (236,642) $ (148,119) $ (72,495) $ (55,922)
Net loss per share applicable to common
stockholders — basic and diluted(1) . . . . . . . . . . . . $
Weighted-average number of common shares used
in net loss per share applicable to common
stockholders — basic and diluted(1) . . . . . . . . . . . .
3,204
(76)
3,128
187
(105)
82
(2.64) $
18,236
(7.27) $
(3.92) $
(5.39) $
27,492
37,793
47,829
43,867
(3.07)
—
—
—
—
(1) See Note 11, “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.
2019
2018
As of December 31,
2017
(in thousands)
2016
2015 (1)
Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 113,938 $ 68,064 $ 400,304 $ 52,069 $ 162,707
—
434,022
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,776
410,304
178,898
707,694
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,640
46,073
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . . . . .
143,979
464,359
425,948
439,464
540,124
46,167
419,009
216,149
191,913
282,795
47,235
213,078
273,052
642,615
715,737
35,373
623,970
(1) Upon the closing of our initial public offering 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.
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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.
Overview
We are a precision therapy company focused on genomically defined cancers, rare diseases and cancer
immunotherapy. Our approach is to leverage our novel target discovery engine to systematically and reproducibly
identify kinases that are drivers of diseases and to craft highly selective and potent therapies 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. We believe that our uniquely targeted, scalable approach empowers the rapid design and
development of new treatments and increases the likelihood of success. We have one precision therapy approved by the
U.S. Food and Drug Administration, or FDA, and are currently advancing multiple investigational medicines in clinical
development, along with multiple research programs.
Avapritinib and BLU-263 — Systemic Mastocytosis and other Mast Cell Disorders
Avapritinib
We are developing avapritinib for the treatment of systemic mastocytosis, or SM, 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. Nearly all cases of SM are driven by the KIT
D816V mutation, which aberrantly activates mast cells.
We are currently evaluating avapritinib in an ongoing registration-enabling Phase 1 clinical trial in advanced
SM, which we refer to as our EXPLORER trial, an ongoing registration-enabling Phase 2 clinical trial in advanced SM,
which we refer to as our PATHFINDER trial, and an ongoing registration-enabling Phase 2 clinical trial in indolent and
smoldering SM, which we refer to as our PIONEER trial. We plan to present updated data from the EXPLORER and
PATHFINDER trials in the second half of 2020. In December 2019, we reported initial data from the dose-finding
portion (part 1) of the PIONEER trial at the 61st American Society of Hematology Annual Meeting and Exposition, or
ASH annual meeting. We plan to report updated data from part 1 of the PIONEER trial in a late-breaking oral
presentation on March 14, 2020 at the annual meeting for the American Academy of Allergy, Asthma & Immunology, or
AAAAI annual meeting. Based on these data, we expect to initiate patient screening in part 2 of the PIONEER trial in
the second quarter of 2020 and complete enrollment by the end of 2020.
We plan to submit a supplemental new drug application, or NDA, to the FDA for avapritinib for the treatment
of advanced SM in the second half of 2020, which we anticipate will be focused on data from patients in the
EXPLORER and PATHFINDER trials who were treated with avapritinib at a starting dose of 200 mg once daily, or QD,
supported by pooled data from all doses. The FDA has granted orphan drug designation to avapritinib for the treatment
of mastocytosis, and the European Commission has granted orphan medicinal product designation to avapritinib for the
treatment of mastocytosis. In addition, the FDA has granted breakthrough therapy designation to avapritinib for the
treatment of advanced SM, including the subtypes of aggressive SM, SM with an associated hematologic neoplasm and
mast cell leukemia.
BLU-263
We are developing BLU-263 for the treatment of indolent SM and other mast cell disorders. BLU-263 is an
investigational, orally available, potent and highly selective KIT inhibitor currently in the discovery stage. BLU-263 is
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designed to have equivalent potency as avapritinib, improved selectivity for KIT, with low off-target activity, and lower
penetration of the central nervous system relative to avapritinib based on preclinical data, which we believe will enable
development of BLU-263 in a broad population of patients with indolent SM, including patients with lower disease
burden requiring potentially life-long chronic therapy, as well as patients with other KIT-driven mast cell disorders. We
plan to submit an investigational new drug application, or IND, for BLU-263 for indolent SM and initiate a Phase 1 trial
in healthy volunteers in the first half of 2020.
Pralsetinib — RET-altered Cancers
We are developing pralsetinib for the treatment of RET-altered non-small cell lung cancer, or NSCLC,
medullary thyroid carcinoma, or MTC, and other solid tumors. Pralsetinib is an investigational, orally available, potent
and highly selective inhibitor that targets RET, a receptor tyrosine kinase. Pralsetinib is designed to inhibit the activating
RET fusions and mutations that drive cancer growth and remain active in the presence of resistance mutations that we
predict will arise from treatment with first generation therapies. RET activating fusions and mutations drive disease in
subsets of patients with NSCLC, and cancers of the thyroid, including MTC and papillary thyroid cancer, or PTC, and
our research suggests that RET may drive disease in subsets of patients with colon cancer, breast cancer, pancreatic
cancer and other cancers.
We are currently evaluating pralsetinib in an ongoing registration-enabling Phase 1/2 clinical trial in patients
with RET-altered NSCLC, MTC and other advanced solid tumors, which we refer to as our ARROW trial. In
January 2020, we reported top-line data from the ARROW trial in RET fusion-positive NSCLC patients treated with
pralsetinib at 400 mg QD. We plan to report top-line data from the ARROW trial in RET-mutant MTC patients in the
second quarter of 2020. In addition, we plan to present the registration data from the ARROW trial of pralsetinib in RET
fusion-positive NSCLC and RET-mutant MTC in 2020. We recently announced the activation of the first trial site for
our Phase 3 clinical trial evaluating pralsetinib in patients with first-line RET fusion-positive NSCLC, which we refer to
as our AcceleRET Lung trial, and we plan to initiate a Phase 3 clinical trial of pralsetinib in first-line RET-mutant MTC
in the second half of 2020.
In January 2020, we initiated the submission of a rolling NDA to the FDA for the treatment of patients with
RET fusion-positive NSCLC, and we expect to complete the submission in the first quarter of 2020. We plan to submit
an NDA to the FDA for pralsetinib for the treatment of patients with MTC previously treated with an approved multi-
kinase inhibitor in the second quarter of 2020. In addition, we plan to submit a marketing authorization application, or
MAA, to the European Medicines Agency, or EMA, for pralsetinib for RET fusion-positive NSCLC in the second
quarter of 2020.
The FDA has granted orphan drug designation to pralsetinib for the treatment of RET-rearranged NSCLC,
JAK1/2-positive NSCLC or TRKC-positive NSCLC, and the FDA has granted breakthrough therapy designation to
pralsetinib for the treatment of patients with RET-fusion positive NSCLC that has progressed following platinum-based
chemotherapy and to pralsetinib for the treatment of patients with RET mutation-positive MTC that requires systemic
treatment and for which there are no acceptable alternative treatments.
Avapritinib — Gastrointestinal Stromal Tumors
We are also developing avapritinib for the treatment of gastrointestinal stromal tumors, or GIST, a rare disease
that is a sarcoma, or tumor of bone or connective tissue, of the gastrointestinal tract. Avapritinib is an orally available,
potent and highly selective inhibitor that targets KIT and PDGFRA mutations. These mutations abnormally activate
receptor tyrosine kinases that are drivers of GIST.
In January 2020, the FDA granted approval of avapritinib under the brand name AYVAKIT for the treatment of
adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations. The efficacy of AYVAKIT was established from 43 patients in the NAVIGATOR trial with unresectable or
metastatic GIST harboring PDGFRA exon 18 mutations, including 38 patients with PDGFRA D842V mutations. The
safety of AYVAKIT in patients with unresectable or metastatic GIST was evaluated in 204 patients who received 300
mg QD or 400 mg QD dosing in the NAVIGATOR trial.
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We are also developing avapritinib for the treatment of third-line and later GIST (including fourth-line GIST).
We are currently evaluating avapritinib for the treatment of GIST in an ongoing registration-enabling global, randomized
Phase 3 clinical trial comparing avapritinib to regorafenib in third-line GIST, which we refer to as our VOYAGER trial.
The FDA is currently reviewing our NDA for avapritinib for the treatment of fourth-line GIST, and this application has a
Prescription Drug User Fee Act, or PDUFA, action date of May 14, 2020. As part of the review, the FDA has requested
top-line data from our VOYAGER trial. We expect to provide the top-line data to the FDA early in the second quarter of
2020 to enable the FDA to take action by the PDUFA action date and we also expect to report the top-line data in the
second quarter of 2020.
Based on data from the VOYAGER trial, we plan to submit a supplemental NDA to the FDA for avapritinib for
the treatment of third-line GIST in the second half of 2020. In addition, the EMA is currently reviewing our MAA for
the treatment of adult patients with PDGFRA D842V mutant GIST, regardless of prior therapy, and we anticipate a
decision from the European Commission in the third quarter of 2020. We plan to pursue an MAA for third-line and later
GIST (including fourth-line GIST) based on data from our VOYAGER trial.
The FDA has granted breakthrough therapy designation to avapritinib for the treatment of patients with
unresectable or metastatic GIST harboring the PDGFRA D842V mutation. The FDA has also granted orphan drug
designation to avapritinib for the treatment of GIST and fast track designation to avapritinib for (i) the treatment of
patients with unresectable or metastatic GIST that progressed following treatment with imatinib and a second tyrosine
kinase inhibitor and (ii) the treatment of patients with unresectable or metastatic GIST with the PDGFRA D842V
mutation regardless of prior therapy. In addition, the European Commission has granted orphan medicinal product
designation to avapritinib for the treatment of GIST.
Fisogatinib — Hepatocellular Carcinoma
We are developing fisogatinib for the treatment of advanced hepatocellular carcinoma, or HCC. Fisogatinib is
an investigational, orally available, potent and highly selective inhibitor that targets FGFR4, a kinase that is aberrantly
activated in a defined subset of patients with HCC, the most common type of liver cancer. We are currently evaluating
fisogatinib in an ongoing Phase 1 clinical trial in patients with advanced HCC. As part of our collaboration with CStone
Pharmaceuticals, or CStone, we are also evaluating fisogatinib in combination with CS1001, a clinical-stage anti-PDL1
immunotherapy being developed by CStone, for the treatment of locally advanced or metastatic HCC in an ongoing
Phase 1b/2 trial conducted in multiple clinical sites in China. The FDA has granted orphan drug designation to
fisogatinib for the treatment of HCC.
Discovery Platform
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. In January 2020, we announced the nomination of a development candidate for the treatment of
EGFR Exon 19/L858R+T790M+C797S, which we refer to as resistant EGFR-positive triple mutant NSCLC. Following
this nomination, we currently have five wholly-owned discovery programs, consisting of the following: BLU-263; the
development candidate for the treatment of resistant EGFR-positive triple mutant NSCLC; a pre-development candidate
program targeting EGFR Exon 19/L858R+C797S, which we refer to as resistant EGFR-positive double mutant NSCLC;
and two pre-development candidate programs for undisclosed kinase targets. EGFR Exon 19/L858R+T790M+C797S
and EGFR Exon 19/L858R+C797S are acquired resistance mutations in NSCLC patients following treatment with
osimertinib. We plan to nominate up to two additional development candidates by the end of 2020.
Development and Commercialization Rights
We currently have worldwide development and commercialization rights to avapritinib, pralsetinib and
fisogatinib, other than the rights licensed to CStone for these drug candidates in Mainland China, Hong Kong, Macau
and Taiwan, or the CStone territory. We currently have worldwide development and commercialization rights to all of
our discovery programs, other than the discovery-stage cancer immunotherapy programs under collaboration with F.
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Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., which we collectively refer to as Roche, and BLU-782, which is
licensed to Clementia Pharmaceuticals, Inc., or Clementia, a wholly-owned subsidiary of Ipsen S.A .
Collaborations and Licenses
Roche. We entered into a collaboration with Roche in March 2016. Under our collaboration agreement with
Roche, we are working with Roche to discover, develop and commercialize up to four small molecule therapeutics
targeting kinases believed to be important in cancer immunotherapy, as single products or possibly in combination with
other therapeutics. In the fourth quarter of 2019, we and Roche announced one of the kinase targets under the
collaboration, MAP4K1, which is believed to play a role in T cell regulation.
CStone. We entered into a collaboration with CStone in June 2018. Under our collaboration agreement with
CStone, we are seeking to develop and commercialize avapritinib, pralsetinib and fisogatinib, including back-up forms
and certain other forms, in the CStone territory either as a monotherapy or as part of a combination therapy.
Clementia. In October 2019, we entered into a license agreement with Clementia, a wholly-owned subsidiary of
Ipsen S.A., and granted an exclusive, worldwide, royalty-bearing license to Clementia to develop and commercialize
BLU-782, as well as specified other compounds related to the BLU-782 program. BLU-782 is an investigational, orally
available, potent and highly selective inhibitor that targets mutant activin-like kinase 2, or ALK2, in development for the
treatment of fibrodysplasia ossificans progressiva, or FOP. Clementia is planning to commence a potentially pivotal
Phase 2 trial of BLU-782 for the treatment of FOP in 2020 as a monotherapy. The FDA has granted a rare pediatric
disease designation, orphan drug designation and fast track designation to BLU-782, each for the treatment of FOP.
We will continue to evaluate additional collaborations, partnerships and licenses that could maximize the value
for our programs and allow us to leverage the expertise of strategic collaborators, partners and licensors, including in
additional geographies where we may not have current operations or expertise. We are also focused on engaging in
collaborations, partnerships and license agreements to capitalize on our discovery platform outside of our primary
strategic focus area of cancer and rare diseases.
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, 2019, we
have received an aggregate of $1.5 billion from such transactions, including $1.2 billion in aggregate gross proceeds
from the sale of common stock in our May 2015 initial public offering, or IPO, and December 2016, April 2017,
December 2017 and April 2019 follow - on public offerings, $115.1 million in gross proceeds from the issuance of
convertible preferred stock, $18.8 million in upfront and milestone payments under our former collaboration with
Alexion Pharma Holding, or Alexion, $63.0 million in upfront and milestone payments under our collaboration with
Roche, $50.0 million upfront and milestone payments under our collaboration with CStone, a $25.0 million upfront
payment under our license agreement with Clementia and $10.0 million in gross proceeds from a debt financing. In
addition, we received $308.2 million in estimated net proceeds from our January 2020 follow-on public offering, after
deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Since inception, we have incurred significant operating losses. Our net losses were $347.6 million, $236.6
million and $148.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of
December 31, 2019, we had an accumulated deficit of $945.2 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 avapritinib, pralsetinib, fisogatinib
and BLU-263;
seek marketing approval for avapritinib in additional geographies and indications and marketing
approvals for other drug candidates;
• maintain and expand our sales, marketing and distribution infrastructure to commercialize any
medicines for which we may obtain marketing approval;
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•
•
•
•
continue to manufacture increasing quantities of drug substance and drug product material for use in
pre-clinical studies, clinical trials and commercialization;
continue to discover, validate and develop additional drug candidates;
conduct research and development activities under our collaborations with Roche and CStone;
conduct development and commercialization activities for companion diagnostic tests for AYVAKIT
and current or future drug candidates;
• maintain, expand and protect our intellectual property portfolio;
•
•
•
acquire or in-license other drug, drug candidates or technologies;
hire additional research, clinical, quality, manufacturing, regulatory, commercial and general and
administrative personnel; and
incur additional costs associated with operating as a public company.
Financial Operations Overview
Revenue
As of December 31, 2019, our revenue consists of collaboration revenue under our collaborations with Roche
and CStone, including amounts that are recognized related to upfront payments, milestone payments and amounts due to
us for research and development services, and license revenue under our license agreement with Clementia.
In January 2020, the FDA granted approval of avapritinib under the brand name AYVAKIT for the treatment of
adults with unresectable or metastatic GIST harboring a PDGFRA exon 18 mutation, including PDGFRA D842V
mutations, and we have commenced the sale of AYVAKIT in the U.S. As a result, we will generate revenue from sales
of AYVAKIT in 2020. In the future, we expect to generate revenue from a combination of sales of our approved drugs,
royalties on drug sales and cost reimbursements, as well as upfront, milestone, royalty and other payments, if any, under
any current or future collaborations and licenses, including revenues related to the supply of our drug candidates or
approved drugs to CStone for development and commercialization activities in the CStone territory. We expect that any
revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of product sales, license
fees, research and development services and related reimbursements, payments for manufacturing services, and option
fees, milestone payments or other payments under our collaboration or license agreements, if any.
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;
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•
•
•
the cost associated with regulatory quality assurance and quality control operations;
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 in support of research and development
activities.
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;
establishing commercial manufacturing capabilities or making arrangements with third-party
manufacturers;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for AYVAKIT
and our drug candidates;
commercializing AYVAKIT and our drug candidates, if and when approved, whether alone or in
collaboration with others;
• market acceptance of AYVAKIT and any future drug we may commercialize; 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. Except
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for internal research and development expenses related to collaboration agreements, 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, 2019, 2018 and 2017. Other development and pre - development candidate expenses, unallocated
expenses and internal research and development expenses have been classified separately.
Year Ended December 31,
2019
2018
(in thousands)
2017
Avapritinib external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,146 $ 83,417 $
Pralsetinib external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fisogatinib external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BLU-263 external expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other development and pre-development candidate expenses and unallocated
41,095
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,151
Internal research and development expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 331,450 $ 243,621 $ 144,687
46,851
13,512
15,078
—
78,689
6,496
4,575
44,099
10,167
—
68,138
75,406
56,709
49,230
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 and preparing regulatory filings. 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 manufacturing expenses for API, drug product and drug
substance for current and future clinical trials and commercial inventory. 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, development activities under our collaboration with CStone
and development activities for companion diagnostic tests for current and future drug candidates.
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, information
technology, legal and human resources functions. Other significant costs include facility costs not otherwise included in
research and development expenses, pre-commercial development activities, legal fees related to intellectual property
and corporate matters and fees for accounting and consulting services.
We expect that our general and administrative expenses will continue to increase in the future to support
additional research and development activities and commercialization activities, including expanding our sales,
marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval in
additional indications or geographies and expanding our operations in the U.S. and outside the U.S. 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 and expanding the scope of our operations.
Interest Income (Expense), net
Interest income (expense), net consists primarily of income earned on cash equivalents and investments.
Other Income (Expense), net
Other income (expense), net consists primarily of foreign currency transaction gains or losses.
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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 revenue recognition, accrued research and development expenses, available-for-sale investments, stock-
based compensation and leases.
Revenue Recognition
Effective January 1, 2018, we adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from
Contracts with Customers, which we refer to as ASC 606, using the modified retrospective transition method. Under this
method, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported in accordance with ASC Topic 605, Revenue Recognition. We only
applied the modified retrospective transition method to contracts that were not completed as January 1, 2018, the
effective date of adoption for ASC 606. This standard applies to all contracts with customers, except for contracts that
are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
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. We only apply the five-
step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the
goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the
scope of ASC 606, we assess the goods or services promised within each contract and determine those that are
performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the
amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.
We enter into licensing agreements that are within the scope of ASC 606, under which we may exclusively
license rights to research, develop, manufacture and commercialize our drug and drug candidates to third parties. The
terms of these arrangements typically include payment of one or more of the following: non-refundable, upfront license
fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone
payments; and royalties on net sales of licensed products.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our
agreements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii)
determination of whether the promised goods or services are performance obligations including whether they are distinct
in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable
consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue
when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must use
significant judgment to determine: (a) the number of performance obligations based on the determination under step (ii)
above; (b) the transaction price under step (iii) above; and (c) the stand-alone selling price for each performance
obligation identified in the contract for the allocation of transaction price in step (iv) above. We use judgment to
determine whether milestones or other variable consideration, except for royalties and sales-based milestones, should be
included in the transaction price as described further below. The transaction price is allocated to each performance
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obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance
obligations under the contract are satisfied.
Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be
recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred
revenue in the accompanying consolidated balance sheets. 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.
Exclusive Licenses. If the license to our intellectual property is determined to be distinct from the other
promises or performance obligations identified in the arrangement, we recognize revenue from non-refundable, upfront
fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit
from the license. In assessing whether a promise or performance obligation is distinct from the other promises, we
consider factors such as the research, development, manufacturing and commercialization 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 benefit from a promise for its intended purpose without the receipt of the
remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other
vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise.
For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined
performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in
time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate
the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue
recognition. The measure of progress, and thereby 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.
Research and Development Services. The promises under our collaboration agreements may include research
and development services to be performed by our employees 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. Reimbursements from and payments to the partner that are the
result of a collaborative relationship with the partner, instead of a customer relationship, such as co-development
activities, are recorded as a reduction to research and development expense.
Customer Options. If an arrangement is determined to contain customer options that allow the customer to
acquire additional goods or services, the goods and services underlying the customer options that are not determined to
be material rights are not considered to be performance obligations at the outset of the arrangement, as they are
contingent upon option exercise. We evaluate the customer options for material rights, or options to acquire additional
goods or services for free or at a discount. If the customer options are determined to represent a material right, the
material right is recognized as a separate performance obligation at the outset of the arrangement. We allocate the
transaction price to material rights based on the relative standalone selling price, which is determined based on the
identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right
are not recognized as revenue until, at the earliest, the option is exercised.
Milestone Payments. At the inception of each arrangement that includes research or development milestone
payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be
included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal
would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not
within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until
those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks
that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment
involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each
subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if
necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-
up basis, which would affect revenues and earnings in the period of adjustment.
Royalties. For arrangements that include sales-based royalties, including milestone payments upon first
commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor
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relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize
revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of
the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any royalty
revenue resulting from any of our licensing arrangements.
Collaborative Arrangements. We analyze our collaboration arrangements to assess whether such arrangements
involve joint operating activities performed by parties that are both active participants in the activities and exposed to
significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of
ASC 808, Collaborative Arrangements, which we refer to as ASC 808. This assessment is performed throughout the life
of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration
arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the
collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective
of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration
arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied
consistently, generally by analogy to ASC 606. Amounts that are owed to collaboration partners are recognized as an
offset to collaboration revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a
collaboration partner exceed our collaboration revenues in each quarterly period, such amounts are classified as research
and development expense. For those elements of the arrangement that are accounted for pursuant to ASC 606, we apply
the five-step model described above under ASC 606.
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.
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.
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
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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 consolidated statement of operations and comprehensive loss.
Stock-Based Compensation
We account for stock-based compensation awards in accordance with ASC 718, Compensation –Stock
Compensation, which we refer to as ASC 718. We expense the fair value of stock-based awards granted to employees
and members of the board of directors over the requisite service period, which is typically the vesting period.
Compensation cost for stock-based awards issued to employees is measured using the estimated fair value at the grant
date 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. For these analyses, we select
companies with comparable characteristics to ours including enterprise value, risk profiles, position
within the industry, and with historical share price information sufficient to meet the expected life of
the stock-based awards. We compute the historical volatility data using the daily closing prices for the
selected companies’ shares during the equivalent period of the calculated expected term of our stock-
based awards. 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. Under
this approach, the weighted-average expected life is presumed to be the average of the contractual term
of ten years and the weighted-average vesting term of the stock options, taking into consideration
multiple vesting tranches;
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.
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. The measurement date for non-employee awards is the date of grant. Stock - based awards
subject to service - based vesting conditions are expensed on a straight - line basis over the vesting period.
The purchase price of common stock under our 2015 employee stock purchase plan, as amended, or 2015
ESPP, is equal to 85% of the lesser of (i) the fair market value per share of the common stock on the first business day of
an offering period and (ii) the fair market value per share of the common stock on the purchase date. The fair value of
the discounted purchases made under our 2015 ESPP is calculated using the Black-Scholes valuation model. The fair
value of the look-back provision plus the 15% discount is recognized as compensation expense over the 180-day
purchase period.
Leases
On January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 84), which we refer to as ASC 842, which
requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet.
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We adopted ASC 842 using a modified retrospective approach for all leases existing at January 1, 2019. The adoption
of ASC 842 had a substantial impact on our consolidated balance sheet and no impact to our consolidated statements of
operations. Upon adoption of ASC 842, we recognized an adjustment of $54.2 million and $74.1 million to operating
lease right-of-use assets and the related lease liabilities, respectively. The operating lease liabilities are based on the
present value of the remaining minimum lease payments discounted using our secured incremental borrowing rate at the
effective date of January 1, 2019.
For contracts entered into on or after the effective date, at the inception of a contract, we assess whether the
contract is, or contains, a lease. The assessment is based on: (1) whether the contract involves the use of a distinct
identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset
throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we
allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the
lease payments.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any
one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease
contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the
remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair
value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria.
For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The
right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present
value of the lease payments under the lease.
The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease
liability, plus any initial direct costs incurred if any, less any lease incentives received. All right-of-use assets are
reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental
borrowing rate for the same term as the underlying lease.
Lease payments included in the measurement of the lease liability comprise the following: the fixed
noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period
will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be
terminated early.
Lease cost for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage
commissions, and is recognized on a straight-line basis over the lease term. Included in lease cost are any variable lease
payments incurred in the period that are not included in the initial lease liability and lease payments incurred in the
period for any leases with an initial term of 12 months or less. Lease cost for finance leases consists of the amortization
of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost
basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
We made an accounting policy election to not recognize leases with an initial term of 12 months or less within
our consolidated balance sheets and to recognize those lease payments on a straight-line basis in our consolidated
statements of income over the lease term.
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Results of Operations
Comparison of Years Ended December 31, 2019 and 2018
The following table summarizes our results of operations for the years ended December 31, 2019 and 2018,
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,
2019
2018
(in thousands)
Dollar Change % Change
66,512 $
44,521 $
21,991
49 %
331,450
96,388
427,838
243,621
47,928
291,549
87,829
48,460
136,289
36
101
47
Interest income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
3,166
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
(80)
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,246
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (347,694) $ (236,642) $ 111,052
10,566
(180)
10,386
13,732
(100)
13,632
30
(44)
31
47 %
Collaboration Revenue
Collaboration revenue increased by $22.0 million from $44.5 million for the year ended December 31, 2018 to
$66.5 million for the year ended December 31, 2019. Collaboration revenue for the year ended December 31, 2019 was
related to the CStone, Roche and Clementia agreements. Collaboration revenue for the year ended December 31, 2018
was related to the CStone and Roche agreements. We recorded $12.1 million and $40.0 million revenue under the
CStone agreement for the years ended December 31, 2019 and 2018, respectively. Collaboration revenue related to the
CStone agreement for the year ended December 31, 2019 consisted of $12.0 million in milestone revenue related to
several development and regulatory milestones that were achieved during the year and $0.1 million related to drug
supply for territory specific trials. Collaboration revenue related to the CStone agreement for the year ended
December 31, 2018 consisted of a $40.0 million upfront payment was recognized upon the execution of the CStone
collaboration agreement. We recorded $8.2 million and $4.5 million revenue under the Roche agreement for the years
ended December 31, 2019 and 2018, respectively, primarily related to amortization of the total upfront and milestone
payments received as of such periods. We recorded $46.2 million revenue under the Clementia license agreement for the
year ended December 31, 2019, which consisted of a $25.0 million upfront payment received, a $20.0 million cash
milestone payment due in the third quarter of 2020 and a $1.2 million inventory transfer.
Research and Development Expense
Research and development expense increased by $87.8 million from $243.6 million for the year ended
December 31, 2018 to $331.5 million for the year ended December 31, 2019. The increase in research and development
expense was primarily related to the following:
•
•
•
approximately $35.3 million in increased expenses for external clinical activities related to avapritinib,
pralsetinib and BLU-782;
approximately $31.3 million in increased personnel expense, primarily due to an increase in
headcount, which was driven by growth in the clinical and manufacturing organizations and an
increase of $11.6 million in stock-based compensation expense;
approximately $15.1 million in increased expenses associated with clinical and commercial
manufacturing activities; and
104
•
approximately $6.1 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 $48.5 million from $47.9 million for the year ended
December 31, 2018 to $96.4 million for the year ended December 31, 2019. The increase in general and administrative
expense was primarily related to increased costs and personnel expenses, including an increase of $12.5 million in stock-
based compensation expense, associated with building our commercial infrastructure and to support the overall growth
of our business.
Interest Income (Expense), Net
Interest income (expense), net increased by $3.2 million from $10.6 million for the year ended December 31,
2018 to $13.7 million for the year ended December 31, 2019. The increase was primarily related to higher average
investment balances and a higher rate of return on investments.
Other Income (Expense), Net
Other income (expense), net, decreased by less than $0.1 million from $0.2 million for the year ended
December 31, 2018 to $0.1 million for the year ended December 31, 2019. The decrease was primarily related to
changes in foreign currency exchange rates.
Comparison of Years Ended December 31, 2018 and 2017
The following table summarizes our results of operations for the years ended December 31, 2018 and 2017,
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,
2018
2017
Dollar Change % Change
44,521 $
21,426 $
23,095
108 %
(in thousands)
243,621
47,928
291,549
144,687
27,986
172,673
98,934
19,942
118,876
68
71
69
Interest income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (236,642) $ (148,119) $
10,566
(180)
10,386
3,204
(76)
3,128
7,362
104
7,258
88,523
230
137
232
60 %
Collaboration Revenue
Collaboration revenue increased by $23.1 million from $21.4 million for the year ended December 31, 2017 to
$44.5 million for the year ended December 31, 2018. Collaboration revenue for the year ended December 31, 2018 was
related to the CStone and Roche agreements. Collaboration revenue for the year ended December 31, 2017 was related
to the Roche and Alexion agreements. We entered into the CStone agreement on June 1, 2018 and recorded
collaboration revenue of $40.0 million under the CStone agreement for the year ended December 31, 2018. We recorded
$4.5 million and $5.2 million in collaboration revenue under the Roche agreement for the years ended
December 31, 2018 and December 31, 2017, respectively. The decrease was primarily due to the adoption of ASC 606
on January 1, 2018 and the resulting change in the revenue recognition pattern. We recorded collaboration revenue of
$16.2 million under the Alexion agreement for the year ended December 31, 2017. As a result of the termination of the
105
Alexion agreement during 2017, we did not recognize any revenue under the Alexion agreement for the year ended
December 31, 2018.
Research and Development Expense
Research and development expense increased by $98.9 million from $144.7 million for the year ended
December 31, 2017 to $243.6 million for the year ended December 31, 2018. The increase in research and development
expense was primarily related to the following:
•
•
•
•
•
approximately $35.3 million in increased expenses for external clinical activities related to avapritinib
and pralsetinib;
approximately $27.5 million in increased personnel expense, primarily due to an increase in
headcount, which was driven by growth in the clinical and manufacturing organizations as we advance
our drug candidates and an increase of $10.7 million in stock-based compensation expense;
approximately $27.3 million in increased expenses associated with clinical and commercial
manufacturing activities;
approximately $5.6 million in increased expenses associated with continuing to build our discovery
platform and advance our discovery pipeline; and
approximately $2.8 million in increased toxicology studies, including expenses associated with pre-
clinical studies, including IND-enabling studies, related to BLU-782.
General and Administrative Expense
General and administrative expense increased by $19.9 million from $28.0 million for the year ended
December 31, 2017 to $47.9 million for the year ended December 31, 2018. The increase in general and administrative
expense was primarily related to the following:
•
•
•
approximately $11.1 million in increased personnel expenses, primarily due to an increase in general
and administrative headcount to support our overall growth and including an increase of $7.3 million
in stock-based compensation expense;
approximately $6.1 million in increased professional fees, including pre-commercial planning
activities; and
approximately $2.1 million in increased facility costs related to our new headquarters in 2018.
Interest Income (Expense), Net
Interest income (expense), net increased by $7.4 million from $3.2 million for the year ended December 31,
2017 to $10.6 million for the year ended December 31, 2018. The increase was primarily related to higher average
investment balances and a higher rate of return on investments.
Other Income (Expense), Net
Other income (expense), net, increased by $0.1 million from $0.1 million of expense for the year ended
December 31, 2017 to $0.2 million of expense for the year ended December 31, 2018.
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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, a license agreement and a debt financing.
Through December 31, 2019, we have received an aggregate of $1.5 billion from such transactions, including
$1.2 billion in aggregate gross proceeds from the sale of common stock in our May 2015 IPO and December 2016,
April 2017, December 2017 and April 2019 follow - on public offerings, $115.1 million in gross proceeds from the
issuance of convertible preferred stock, $18.8 million in upfront and milestone payments from Alexion, $63.0 million in
upfront and milestone payments from Roche, $50.0 million in upfront and milestone payments from CStone, a $25.0
million in upfront payment from Clementia and $10.0 million in gross proceeds from a debt financing.
As of December 31, 2019, we had cash, cash equivalents and investments of $548.0 million. In addition, we
received $308.2 million in estimated net proceeds from our January 2020 follow-on public offering, after deducting
underwriting discounts and commissions and estimated offering expenses payable by us.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2019,
2018 and 2017:
(in thousands)
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (278,015) $ (175,009) $ (119,865)
(72,347)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(161,088)
(16,466)
340,638
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
543,948
4,454
46,157 $ (331,643) $ 351,736
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $
2017
2019
Year Ended December 31,
2018
Net Cash Used in Operating Activities. For the year ended December 31, 2019, compared to the same period in
2018, the $103.0 million increase in net cash used in operating activities was primarily due to the increase in net loss
during this period of $110.0 million, which was driven by increased payroll and payroll-related expenses and spending
on pre-clinical, clinical and pre-commercial activities, partially offset by upfront and milestone payments received
during year ended December 31, 2019. The net cash flows provided by operating activities for year ended December 31,
2019 reflect a $25.0 million upfront payment received under the Clementia agreement, an aggregate of $10.0 million in
milestone payments received under the CStone agreement and an $8.0 million milestone payment received under the
Roche agreement.
For the year ended December 31, 2018, compared to the same period in 2017, the $55.1 million increase in net
cash used in operating activities was primarily due to the increase in net loss during this period of $88.5 million, which
was driven by increased payroll and payroll-related expenses and spending on pre-clinical, clinical and pre-commercial
activities, partially offset by upfront and milestone payments received during year ended December 31, 2018. The net
cash flows provided by operating activities for year ended December 31, 2018 reflect a $40.0 million upfront payment
received under the CStone agreement and a $10.0 milestone payment received under the Roche agreement. We did not
receive any upfront payments or milestones during year ended December 31, 2017.
Net Cash Used in Investing Activities. For the year ended December 31, 2019, compared to the same period in
2018, the $144.6 million decrease in net cash used in investing activities was primarily due to a decrease in net
purchases of available-for-sale investments.
For the year ended December 31, 2018, compared to the same period in 2017, the $88.7 million increase in net
cash used in investing activities was primarily due to an increase in net purchases of available-for-sale investments.
107
Net Cash Provided by Financing Activities. For the year ended December 31, 2019, compared to the same
period in 2018, the $336.2 million increase in net cash provided by financing activities was primarily due to a $327.5
million increase in net proceeds received from our April 2019 follow-on public offering, after deducting underwriting
discounts and commissions and offering expenses paid by us, and a $6.9 million increase in proceeds received from
stock option exercises.
For the year ended December 31, 2018, compared to the same period in 2017, the $539.5 million decrease in
net cash provided by financing activities was primarily due to a total of $541.5 million decrease in net proceeds received
from our April 2017 and December 2017 follow-on public offerings, after deducting underwriting discounts and
commissions and offering expenses paid by us, partially offset by proceeds received from stock option exercises.
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 the years
ended December 31, 2018 and 2017, we paid principal payments of $1.5 million and $2.6 million, respectively, on the
$10.0 million of advances. We were required to pay a fee of 4% of the total loan advances at the end of the term of the
loan. There were no financial covenants associated with the loan and security agreement. As of December 31, 2019 and
2018, we had no outstanding principal and interest under the loan and security agreement.
See Note 9, “Term Loan,” in the accompanying notes to our audited consolidated financial statements for
additional information.
Funding Requirements
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,
including marketing approval for AYVAKIT for additional indications or in additional geographies. In addition, we
expect to incur additional significant commercialization expenses for AYVAKIT and other drug candidates, if approved,
related to drug sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing
and distribution are not the responsibility of potential collaborators or licensors. We may also need to raise additional
funds sooner if we choose to pursue additional indications or geographies for any of our approved drugs or 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, 2019, we had cash, cash equivalents and investments of $548.0 million. Based on our
current plans, we believe that our existing cash, cash equivalents and investments including the $308.2 million in
estimated net proceeds from our January 2020 follow-on public offering, together with anticipated product revenues but
excluding any additional potential option fees, milestone payments or other payments under our collaboration or license
agreements, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the
second half of 2022. 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 approved drugs and drug candidates;
the costs of securing manufacturing, packaging and labeling arrangements for development activities
and commercial production, including active pharmaceutical ingredient, or API, drug substance and
drug product material for use in pre-clinical studies, clinical trials, our compassionate use program and
for use as commercial supply, as applicable;
the costs, timing and outcome of regulatory review of marketing applications for our drug candidates,
including avapritinib for additional indications or in additional geographies;
108
•
•
•
•
•
•
•
•
•
the costs of maintaining, expanding or contracting for sales, marketing and distribution capabilities in
connection with commercialization of any of our approved drugs;
the success of our collaborations with Roche and CStone and our license agreement with Clementia, as
well as our ability to establish and maintain additional collaborations, partnerships or licenses on
favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under our
collaboration agreements with Roche and CStone or license agreement with Clementia, or any
collaboration, partnership or license 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 extent to which we acquire or in-license other drugs, drug candidates or technologies and the terms
of any such arrangements;
the success of our current or future collaborations for the development of companion diagnostic tests;
the success of our commercialization efforts and market acceptance for AYVAKIT or any of our
future approved drugs;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims; and
the costs of continuing to expand our operations outside the U.S.
Identifying potential drug candidates, conducting pre-clinical development and testing and clinical trials and,
for any drug candidates that receive marketing approval, establishing and maintaining commercial infrastructure 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 additional marketing approvals, including for avapritinib in additional indications or
geographies, and achieve substantial revenues for any of our drugs that receive marketing approval, including for
AYVAKIT in the U.S. In addition, AYVAKIT and any other drug candidates that receive marketing approvals,
including AYVAKIT for additional indications or in additional geographies, may not achieve commercial success.
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
primarily 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
collaborations with Roche and CStone and the license agreement with Clementia, which are limited in scope and
duration and subject to the achievement of milestones or royalties on sales of licensed products, if any. 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, drugs 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 and drug candidates
that we would otherwise prefer to develop and market ourselves.
109
Contractual Obligations
The following table summarizes our significant contractual obligations as of payment due date by period at
December 31, 2019:
Payments Due by Period
(in thousands)
Operating lease obligations (1) . . . . . . . $ 137,616 $
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 137,616 $
Less than 1 Year 1 to 3 Years 3 to 5 Years More than 5 Years
70,350
70,350
11,916 $ 29,483 $ 25,867 $
11,916 $ 29,483 $ 25,867 $
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.
In the normal course of business, we enter into agreements 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 certain of our drug candidates. We have not
included these commitments on our 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, 2019 and 2018, we had cash, cash equivalents and investments of $548.0 million and
$494.0 million, respectively, consisting primarily of money market funds and investments in U.S. government agency
and 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 in 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, 2019 and 2018, we had minimal or no liabilities denominated
in foreign currencies.
Inflation generally affects us by increasing our cost of labor, clinical trial and manufacturing 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, 2019 and 2018.
110
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 Chief Financial Officer (our
principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2019. Based upon such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of December 31, 2019, 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.
111
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, 2019 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, 2019.
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,
2019, 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, 2019, 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, 2019
and 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2019, and the related notes and our report dated February 13,
2020 expressed an unqualified opinion thereon.
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.
112
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 13, 2020
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, 2019 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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 2020 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 2020 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 2020 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 2020 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 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
113
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial Statements
PART IV
The following documents are included on pages F-1 through F-38 attached hereto and are filed as part of this
Annual Report on Form 10-K.
F-2
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
(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
Description of Exhibit
Form
File No.
Exhibit
Number
Filing Date
Incorporated by Reference
Fifth Amended and Restated Certificate of
Incorporation of the Registrant
10-Q
001-37359
3.1
November 9, 2015
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
S-1
Description of the Registrant’s securities registered
pursuant to Section 12 of the Securities and
Exchange Act of 1934, as amended
333-
202938
333-
202938
4.1
April 20, 2015
4.4
March 23, 2015
*
2011 Stock Option and Grant Plan, as amended, and
forms of award agreements thereunder
S-1
333-
202938
10.1 March 23, 2015
3.1
3.2
4.1
4.2
4.3
10.1#
10.2#
2015 Stock Option and Incentive Plan and forms of
award agreements thereunder
10.3#
2015 Employee Stock Purchase Plan
*
*
10.4
10.5
10.6
Lease Agreement, dated February 11, 2015, by and
between the Registrant and 38 Sidney Street Limited
Partnership
S-1
333-
202938
10.4 March 23, 2015
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
10-K
001-37359 10.5 February 26, 2019
10-Q
001-37359 10.1
May 3, 2017
114
Exhibit
Number
10.7
10.8#
10.9#
10.10#
10.11#
10.12#
10.13#
10.14#
10.15#
10.16#
10.17#
10.18#
10.19#
10.20†
Description of Exhibit
Form
File No.
Exhibit
Number
Filing Date
Incorporated by Reference
First Amendment of Lease, dated September 19,
2018, between Blueprint Medicines Corporation 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
Employment Agreement, dated March 10, 2016, by
and between the Registrant and Kathryn Haviland
First Amendment to Employment Agreement, dated
January 30, 2019, by and between the Registrant and
Kathryn Haviland
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
First Amendment to Employment Agreement, dated
January 30, 2019, by and between the Registrant and
Michael Landsittel
Employment Agreement, dated October 29, 2018, by
and between the Registrant and Christina Rossi
Employment Agreement, dated March 6, 2019, by
and between the Registrant and Ariel Hurley
Employment Agreement, dated November 22, 2017,
by and between the Registrant and Debra Durso-
Bumpus, as amended by the First Amendment to
Employment Agreement, dated February 10, 2020,
by and between the Registrant and Debra Durso-
Bumpus
8-K
001-37359 10.1 September 25, 2018
10-Q
001-37359 10.2 November 9, 2015
10-Q
001-37359 10.4 November 9, 2015
10-K
001-37359 10.9 March 11, 2016
8-K
001-37359 10.2
February 5, 2019
10-Q
001-37359 10.3 November 10, 2016
8-K
001-37359 10.1 November 14, 2016
10-Q
001-37359 10.1 October 31, 2017
8-K
001-37359 10.1 November 22, 2017
8-K
001-37359 10.1
February 5, 2019
8-K
001-37359 10.1 October 29, 2018
8-K
001-37359 10.1
March 8, 2019
*
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
10-Q/A 001-37359 10.2
July 22, 2016
10.21†
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
10-Q
001-37359 10.1
August 9, 2016
115
Exhibit
Number
10.22
10.23†
10.24††
10.25††
10.26††
10.27†
10.28††
10.29
10.30
Description of Exhibit
Form
File No.
Exhibit
Number
Filing Date
Incorporated by Reference
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
Fourth Amendment to Collaboration and License
Agreement, effective February 25, 2019, by and
among F. Hoffmann-La Roche Ltd, Hoffmann-La
Roche Inc. and the Registrant
Fifth Amendment to Collaboration and License
Agreement, effective June 28, 2019, by and among
F. Hoffmann-La Roche Ltd, Hoffmann-La Roche
Inc. and the Registrant
Sixth Amendment to Collaboration and License
Agreement, effective November 1, 2019, by and
among F. Hoffmann-La Roche Ltd, Hoffmann-La
Roche Inc. and the Registrant
Seventh Amendment to Collaboration and License
Agreement, effective December 17, 2019, by and
among F. Hoffmann-La Roche Ltd, Hoffmann-La
Roche Inc. and the Registrant
License and Collaboration Agreement, dated June 1,
2018, between the Registrant and CStone
Pharmaceuticals
License Agreement, effective October 15, 2019, by
and between the Registrant and Clementia
Pharmaceuticals, Inc.
10-Q
001-37359 10.1 November 10, 2016
10-K
001-37359 10.26 February 26, 2019
8-K
001-37359 10.1
July 3, 2019
10-Q
001-37359 10.2 November 5, 2019
8-K
001-37359 10.1 December 20, 2019
10-Q
001-37359 10.1
August 1, 2018
10-Q
001-37359 10.1 November 5, 2019
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
10.31
Senior Executive Cash Incentive Bonus Plan
10-K
001-37359 10.15 March 11, 2016
21.1
23.1
31.1
31.2
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
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
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
116
*
*
*
*
+
Exhibit
Number
Description of Exhibit
Form
File No.
Exhibit
Number
Filing Date
Incorporated by Reference
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
104
Cover Page Interactive Data File (formatted as inline
XBRL with applicable taxonomy extension
information contained in Exhibits 101.*)
*
*
*
*
*
*
# 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.
††Certain portions of the exhibit have been omitted pursuant to Regulation S-K Item 601(b) because it is both (i) not
material to investors and (ii) likely to cause competitive harm to the Company if publicly disclosed.
* 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.
117
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 13, 2020
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
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 13, 2020
Chief Financial Officer
(Principal Financial Officer)
Vice President, Finance and Controller
(Principal Accounting Officer)
February 13, 2020
February 13, 2020
Chairman of the Board
February 13, 2020
/s/ Jeffrey W. Albers
Jeffrey W. Albers
/s/ Michael Landsittel
Michael Landsittel
/s/ Ariel Hurley
Ariel Hurley
/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.
Director
Director
Director
/s/ Charles A. Rowland, Jr.
Charles A. Rowland, Jr.
Director
/s/ George Demetri
George Demetri, M.D.
/s/ Lonnel Coats
Lonnel Coats
/s/ Lynn Seely
Lynn Seely, M.D.
Director
Director
Director
118
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
Blueprint Medicines Corporation
Index to Consolidated Financial Statements
F-2
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
F-1
Report of Independent Registered Public Accounting Firm
To 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,
2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2019, 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, 2019 and 2018, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, 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 dated February 13, 2020 expressed an unqualified opinion
thereon.
Adoption of ASC 606
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
revenue effective January 1, 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue
from Contracts with Customers (Topic 606), and the related amendments.
Adoption of ASC 842
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
leases effective January 1, 2019 due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases (Topic
842), and the related amendments.
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.
F-2
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
License Agreement with Clementia
Description of the
Matter
As discussed in Note 8 to the consolidated financial statements, the Company recognized $46.2
million in revenue under the license agreement with Clementia Pharmaceuticals, Inc.
(“Clementia”) in the fourth quarter of 2019. The Company determined that there were three distinct
performance obligations in the Clementia agreement: (i) the combination of the License,
Technology Transfer, and Manufacturing Technology Transfer; (ii) delivery of the Existing
Manufacturing Inventory; and (iii) delivery of the In-Process Manufacturing Inventory.
Auditing management’s identification of the performance obligations was challenging as the
contract includes implicit and explicit goods and services. Significant judgment was required in
the evaluation of the identification of the performance obligations and in the evaluation of whether
the identified promised goods and services meet the criteria of being distinct and capable of being
distinct within the context of the contract.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding of, evaluated the design and tested the operating effectiveness of
internal controls that addressed the identified risks related to the Company’s process for identifying
performance obligations in its contracts with customers.
To test the identification of performance obligations, we assessed, among other things, the stated
terms of the Company’s arrangement with Clementia. We also conducted meetings with various
personnel at the Company responsible for negotiating the contract and overseeing the delivery of
the performance obligations in order to understand the nature of the explicit and implicit promised
goods and services as well as understand whether promises were capable of being distinct and
distinct in the context of the contract. Finally, we assessed the Company’s analyses to support
their conclusion of the amount of revenue to recognize in 2019 upon delivery of certain
performance obligations.
Accrued Clinical Trial Expenses
Description of the
Matter
As discussed in Note 2 to the consolidated financial statements, the Company records costs for
clinical trial activities based upon estimates of costs incurred through the balance sheet date that have
yet to be invoiced by the contract research organizations and other vendors.
Auditing the Company’s accruals for clinical trials is challenging due to the fact that information
necessary to estimate the accruals is accumulated from multiple sources. In addition, in certain
circumstances, the determination of the nature and level of services that have been received during
the reporting period requires judgment because the timing and pattern of vendor invoicing does
not correspond to the level of services provided and there may be delays in invoicing from clinical
study sites and other vendors.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding of, evaluated the design and tested the operating effectiveness of
internal controls that addressed the identified risks related to the Company’s process for recording
accrued clinical expenses.
To evaluate the accrual for clinical expenses, our audit procedures included, among others, testing
the completeness and accuracy of the underlying data used in the estimates and evaluating the
significant assumptions including, but not limited to, expected patient enrollment, costs per
F-3
patient, site activation and estimated project duration, that are used by management to estimate the
recorded accruals. To assess the reasonableness of the significant assumptions, we corroborated
the progress of clinical trials with the Company’s clinical team and obtained information directly
from third parties related to active patient sites and currently enrolled patients. We also tested
subsequent invoicing received from such third parties and inspected the Company’s contracts with
third parties and any pending change orders to assess the impact to the accrual through the balance
sheet date and compared that to the Company’s estimates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2011.
Boston, Massachusetts
February 13, 2020
F-4
Blueprint Medicines Corporation
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31, December 31,
2019
2018
Current assets:
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investments, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments, available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
113,938 $
369,616
663
22,749
9,820
516,786
64,406
38,361
72,753
5,166
10,222
707,694 $
68,064
425,948
64
151
5,560
499,787
—
29,627
—
5,154
5,556
540,124
Current liabilities:
Liabilities and stockholders’ equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of lease incentive obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease incentive obligation, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments (Note 16)
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; 49,272,223 and 44,037,026
shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,793
88,706
6,823
6,160
—
106,482
—
89,126
39,913
—
7,814
243,335
3,298
51,711
—
3,600
1,714
60,323
5,130
—
42,567
12,903
192
121,115
—
—
49
1,412,083
(2,535)
(945,238)
464,359
707,694 $
44
1,016,690
(180)
(597,545)
419,009
540,124
F-5
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,
2018
44,521 $
2019
66,512 $
2017
21,426
331,450
96,388
427,838
243,621
47,928
291,549
144,687
27,986
172,673
Interest income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,204
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(76)
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,128
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (347,694) $ (236,642) $ (148,119)
Other comprehensive loss:
10,566
(180)
10,386
13,732
(100)
13,632
Unrealized gain (losses) on pension benefit obligations . . . . . . . . . . . . . . . .
Unrealized gain (losses) on available-for-sale investments. . . . . . . . . . . . . .
Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(251)
—
Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (350,048) $ (236,553) $ (148,370)
Net loss per share — basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3.92)
Weighted-average number of common shares used in net loss per share —
basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,985)
671
(40)
—
105
(16)
(7.27) $
(5.39) $
43,867
47,829
37,793
F-6
Blueprint Medicines Corporation
Consolidated Statements of Stockholders’ Equity
(in thousands)
Additional
Other
Accumulated
Common Stock
Shares
Paid-in
Amount Capital
$
33
10
$
420,533
541,366
$
Comprehensive Accumulated Stockholders’
Loss
Deficit
(18)
—
—
—
—
$ (207,470) $
—
—
—
—
Equity
213,078
541,376
4,887
476
12,523
4,887
476
12,523
428,210
16,703
—
445,622
13,878
—
—
Balance at December 31, 2016 . . . . . . . . . . 33,123,354
Follow on offering, net of issuance costs . . . 10,009,259
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 loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Balance at December 31, 2017 . . . . . . . . . . 43,577,526
Issuance of common stock under stock
plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock under ESPP . . .
Stock-based compensation expense . . . . . . .
Adoption of new accounting standard . . . . .
Unrealized gain on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative translation adjustment . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2018 . . . . . . . . . .
Issuance of common stock under stock
plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock under ESPP . . .
Stock-based compensation expense . . . . . . .
Follow on offering, net of issuance costs . . .
Unrealized loss on pension benefit
obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative translation adjustment . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2019 . . . . . . . . . .
—
—
—
—
44,037,026
—
—
—
49,272,223
552,311
20,724
—
4,662,162
—
—
—
979,785
$
$
(251)
—
(269)
—
(148,119)
$ (355,589) $
(251)
(148,119)
623,970
5,586
750
30,534
—
—
—
—
—
—
—
—
(5,314)
5,587
750
30,534
(5,314)
—
—
35
—
$ 1,016,690
$
105
(16)
—
—
(180)
—
—
—
(236,642)
$ (597,545) $
105
(16)
35
(236,642)
419,009
12,130
1,148
54,653
327,462
—
—
—
—
—
(2,985)
—
—
—
—
—
12,131
1,148
54,653
327,466
(2,985)
—
—
—
$ 1,412,083
$
671
(40)
—
(2,534)
—
—
(347,694)
$ (945,239) $
671
(40)
(347,694)
464,359
—
—
—
—
—
43
1
—
—
—
—
—
—
—
44
1
—
—
4
—
—
—
—
49
$
$
$
F-7
Blueprint Medicines Corporation
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 31,
2018
2019
2017
Cash flows from operating activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (347,694) $ (236,642) $ (148,119)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of premiums and discounts on investments . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
5,259
4,991
54,653
(4,949)
—
4,246
—
30,534
(4,381)
(6)
1,578
—
12,523
(320)
32
(413)
3,577
(6,853)
(458)
1,532
14,597
(11,861)
14,320
—
(119,865)
349
(151)
6,086
(4,242)
(445)
24,804
5,479
(640)
—
(175,009)
(599)
(22,597)
(3,338)
20
1,448
36,980
(94)
—
(2,095)
(278,015)
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash, cash equivalents, and restricted cash . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and restricted
cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . $ 119,604 $ 73,429 $ 405,072
Supplemental cash flow information
Public offering costs incurred but unpaid at period end . . . . . . . . . . . . . . . . . . . $
Property and equipment purchases unpaid at period end . . . . . . . . . . . . . . . . . . $
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
6,425
(162)
4,454
(331,643)
405,072
327,750
13,288
(116)
340,638
46,157
73,429
542,225
5,271
—
543,948
351,736
53,336
(12,677)
(801,236)
652,825
(161,088)
(14,013)
(738,387)
735,934
(16,466)
(15,512)
(360,835)
304,000
(72,347)
— $
912 $
267 $
123 $
— $
958 $
5 $
185 $
317
3,947
151
37
(1,528)
(281)
(2,583)
(965)
—
(284)
—
18
F-8
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the
consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash
flows.
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash included in prepaid expenses and other current assets . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents, and restricted cash shown in consolidated
statements of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, December 31,
2019
113,938
500
5,166
2018
68,064
211
5,154
December 31,
2017
400,304
213
4,555
119,604
73,429
405,072
F-9
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 precision therapy company focused on genomically defined cancers, rare diseases and cancer immunotherapy. The
Company’s approach is to leverage its novel target discovery engine to systematically and reproducibly identify kinases
that are drivers of diseases 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 April 2, 2019, the Company closed a follow-on public offering of 4,662,162 shares of its common stock at a
price to the public of $74.00 per share, including 608,108 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 $327.5 million, after deducting underwriting discounts and commissions and offering
expenses.
On January 27, 2020, the Company closed a follow-on public offering of 4,710,144 shares of its common stock
at a price to the public of $69.00 per share and received estimated net proceeds of $308.2 million, after deducting
underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company has
also granted the underwriters a 30-day option to purchase up to an additional 706,521 shares of its common stock at the
public offering price, less underwriting discounts and commissions.
As of December 31, 2019, the Company had cash, cash equivalents and investments of $548.0 million. Based
on the Company’s current operating plans, the Company believes that its existing cash, cash equivalents and investments
including the $308.2 million in estimated net proceeds from its January 2020 follow-on public offering, together with
anticipated product revenues but excluding any additional potential option fees, milestone payments or other payments
under its collaboration or license agreements, will be sufficient to enable it to fund its current operations for at least the
next twelve months from the issuance of the financial statements.
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 U.S. (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 Securities and Exchange Commission (SEC).
The accompanying consolidated financial statements include the accounts of the Company and its wholly-
owned subsidiaries, Blueprint Medicines Security Corporation, which is a Massachusetts subsidiary created to buy, sell
and hold securities, and Blueprint Medicines (Switzerland) GmbH, Blueprint Medicines (Netherlands) B.V., Blueprint
Medicines (UK) Ltd, Blueprint Medicines (Germany) GmbH, Blueprint Medicines (Spain) S.L., Blueprint Medicines
(France) SAS and Blueprint Medicines (Italy) S.r.L. All intercompany transactions and balances have been eliminated.
Due to the follow-on public offering completed in April 2019, there was a significant increase in shares
outstanding in the year ended December 31, 2019, which impacts the year-over-year comparability of the Company’s net
loss per share calculations.
F-10
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: revenue recognition, operating lease
right-of-use assets, operating lease liabilities, stock - based compensation expense, accrued expenses, and income taxes.
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers
(ASC 606), using the modified retrospective transition method. Under this method, results for reporting periods
beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue
to be reported in accordance with ASC Topic 605, Revenue Recognition (ASC 605). The Company only applied the
modified retrospective transition method to contracts that were not completed as of January 1, 2018, the effective date of
adoption for ASC 606. This standard applies to all contracts with customers, except for contracts that are within the
scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. 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. The Company only applies the five-step
model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the
goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the
scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that
are performance obligations, and assesses whether each promised good or service is distinct. The Company then
recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when
(or as) the performance obligation is satisfied.
The Company enters into licensing agreements that are within the scope of ASC 606, under which it may
exclusively license rights to research, develop, manufacture and commercialize its drug candidates to third parties. The
terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable,
upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and
commercial milestone payments; and royalties on net sales of licensed products.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its
agreements, the Company performs the following steps: (i) identification of the promised goods or services in the
contract; (ii) determination of whether the promised goods or services are performance obligations including whether
they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on
variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of
revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these
arrangements, the Company must use significant judgment to determine: (a) the performance obligations based on the
determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the stand-alone selling price
for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. The
Company uses judgment to determine whether milestones or other variable consideration, except for royalties and sales-
based milestones, should be included in the transaction price as described further below. The transaction price is
allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes
revenue as or when the performance obligations under the contract are satisfied.
Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be
recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred
revenue in the accompanying consolidated balance sheets. 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. If the Company
F-11
performs by transferring goods or services to a customer before the customer pays consideration or before payment is
due, the Company records a contract asset, excluding any amounts presented as accounts receivable. The Company
includes contract assets as unbilled accounts receivable on the consolidated balance sheets. The Company records
accounts receivables for amounts billed to the customer for which the Company has an unconditional right to
consideration. The Company assesses contract assets and accounts receivable for impairment and, to date, no impairment
losses have been recorded.
Exclusive Licenses. If the license to the Company’s intellectual property is determined to be distinct from the
other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-
refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able
to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other
promises, the Company considers factors such as the research, development, 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 benefit from a promise for its intended purpose
without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise,
whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from
the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the
nature of the combined performance obligation to determine whether the combined performance obligation is satisfied
over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of
recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts
the measure of performance and related revenue recognition. The measure of progress, and thereby 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 promises 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. Reimbursements from
and payments to the partner that are the result of a collaborative relationship with the partner, instead of a customer
relationship, such as co-development activities, are recorded as a reduction to research and development expense.
Customer Options. If an arrangement is determined to contain customer options that allow the customer to
acquire additional goods or services, the goods and services underlying the customer options that are not determined to
be material rights are not considered to be performance obligations at the outset of the arrangement, as they are
contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire
additional goods or services for free or at a discount. If the customer options are determined to represent a material right,
the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company
allocates the transaction price to material rights based on the relative standalone selling price, which is determined based
on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material
right are not recognized as revenue until, at the earliest, the option is exercised.
Milestone Payments. At the inception of each arrangement that includes research or development milestone
payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the
amount to be included in the transaction price using the most likely amount method. If it is probable that a significant
revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone
payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered
probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific,
clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this
assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue
reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of
achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price.
Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the
period of adjustment.
Royalties. For arrangements that include sales-based royalties, including milestone payments upon first
commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor
F-12
relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company
recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some
or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized
any royalty revenue resulting from any of its licensing arrangements.
For a complete discussion of accounting for collaboration revenues, see Note 8, Collaboration and License
Agreement.
Prior to January 1, 2018, the Company recognized revenue from license and collaboration agreements in
accordance with ASC Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue was recognized when all of the
following criteria were met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered;
(3) the seller’s price to the buyer is fixed or determinable; and
(4) collectability is reasonably assured.
Amounts received prior to satisfying the revenue recognition criteria were 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 were classified as deferred revenue, current portion. Amounts not expected to be recognized as revenue within
the 12 months following the balance sheet date were classified as deferred revenue, net of current portion.
When evaluating multiple element arrangements, the Company considered whether the deliverables under the
arrangement represented separate units of accounting. This evaluation required subjective determinations and required
management to make judgments about the individual deliverables and whether such deliverables were separable from the
other aspects of the contractual relationship. In determining the units of accounting, management evaluated 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 was allocated among the separate units of accounting
using the relative selling price method, and the applicable revenue recognition criteria were applied to each of the
separate units. Deliverables were 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 had stand-alone value, the Company considered 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 considered whether the collaboration partner
could 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 were 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 was allocated among the separate units of accounting
using the relative selling price method. Then, the applicable revenue recognition criteria in ASC 605-25 were applied to
each of the separate units of accounting in determining the appropriate period and pattern of recognition. The Company
determined the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25.
Accordingly, the Company determined 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 used BESP to estimate the selling price, since it generally did not have VSOE or TPE of selling price for its
units of accounting. Determining the BESP for a unit of accounting required significant judgment. In developing the
BESP for a unit of accounting, the Company considered 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 validated the BESP for units of accounting by evaluating whether changes in the key assumptions used to
determine the BESP would have a significant effect on the allocation of arrangement consideration between multiple
units of accounting.
F-13
In the event that an element of a multiple element arrangement did not represent a separate unit of accounting,
the Company recognized revenue from the combined element over the period over which it expected to fulfill its
performance obligations or as undelivered items were delivered, as appropriate, if all of the other revenue recognition
criteria in ASC 605-25 were met. If the pattern of performance in which the service was provided to the customer could
be determined and objectively measurable performance measures existed, then the Company recognized revenue under
the arrangement using the proportional performance method. If there was no discernible pattern of performance and/or
objectively measurable performance measures did not exist, then the Company recognized revenue under the
arrangement on a straight-line basis over the period the Company was expected to complete its performance obligations.
Revenue recognized was 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
evaluated whether an exclusive license had 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 recognized the arrangement consideration allocated to licenses upon delivery of the
license if facts and circumstances indicated that the license had stand-alone value from the undelivered elements, which
generally included research and development services. The Company deferred arrangement consideration allocated to
licenses if facts and circumstances indicated that the delivered license did not have stand-alone value from the
undelivered elements.
When management believed a license did not have stand-alone value from the other deliverables to be provided
in the arrangement, the Company recognized revenue attributed to the license on a proportional basis over the
Company’s contractual or estimated performance period, which was typically the term of the Company’s research and
development obligations. If management could not reasonably estimate when the Company’s performance obligation
ends, then revenue was deferred until management could reasonably estimate when the performance obligation ended.
The periods over which revenue should be recognized were subject to estimates by management and could change over
the course of the research and development and licensing agreement.
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 were recognized as the services were performed and presented on a gross
basis because the Company was the principal for such efforts, so long as there was persuasive evidence of an
arrangement, the fee was fixed or determinable, and collection of the related amount was 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 evaluated whether each
milestone was substantive and at risk to both parties on the basis of the contingent nature of the milestone. This
evaluation included an assessment of whether:
•
•
the consideration was 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 related solely to past performance; and
F-14
•
the consideration was reasonable relative to all of the deliverables and payment terms within the
arrangement.
The Company evaluated 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 was considerable judgment involved in determining whether a milestone
satisfied all of the criteria required to conclude that a milestone was substantive. Milestones that were not considered
substantive were accounted for as license payments and recognized over the remaining period of performance from the
date of achievement of the milestone. Milestones that were considered substantive were recognized in their entirety upon
successful accomplishment of the milestone with a cumulative catch up adjustments, assuming all other revenue
recognition criteria were met.
Collaborative Arrangements
The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint
operating activities performed by parties that are both active participants in the activities and exposed to significant risks
and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808,
Collaborative Arrangements (ASC 808). This assessment is performed throughout the life of the arrangement based on
changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC
808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be
within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer
relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted
for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by
analogy to ASC 606. Amounts that are owed to collaboration partners are recognized as an offset to collaboration
revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner
exceed the Company’s collaboration revenues in each quarterly period, such amounts are classified as research and
development expense. For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company
applies the five-step model described above under ASC 606.
For a complete discussion of accounting for collaboration revenues, see Note 8, Collaboration and License
Agreement.
Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been classified as
Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
• Level 1 — Fair values are determined utilizing quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Company has the ability to access;
• Level 2 — Fair values are determined by utilizing quoted prices for identical or similar assets and
liabilities in active markets or other market observable inputs such as interest rates, yield curves and
foreign currency spot rates; and
• 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.
The Company’s financial assets, which include cash equivalents and marketable securities, have been initially
valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party
pricing services. The pricing services utilize industry standard valuation models, including both income and market
based approaches, to determine value.
There have been no changes to the valuation methods during the years ended December 31, 2019 and 2018.
F-15
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original maturities of 90 days or less from
the date of purchase to be cash equivalents. As of December 31, 2019 and 2018, cash equivalents were comprised of
money market funds and other debt securities with maturities less than 90 days from the date of purchase. Cash
equivalents are reported at fair value.
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.
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 foreign currency translation adjustments, unrealized gains and losses on available-for-sale investments and unrealized
gains and losses on pension benefit obligations.
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. As part of the process of preparing the consolidated
financial statements, the Company accrues costs for clinical trial activities based upon estimates of the services received
and related expenses incurred that have yet to be invoiced by the contract research organizations or other clinical trial
vendors that perform the activities.
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, 2019.
F-16
Stock - Based Compensation Expense
Stock-based compensation awards are accounted for in accordance with ASC Topic 718, Compensation –Stock
Compensation (ASC 718). The Company expenses the fair value of stock awards granted to employees and members of
the board of directors over the requisite service period, which is typically the vesting period. Compensation cost for
stock-based awards issued to employees is measured using the estimated fair value at the grant date and is adjusted to
reflect actual forfeitures. Fair value of options granted to employees at the date of grant are estimated 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. For these analyses, the
Company selects companies with comparable characteristics to itself including enterprise value, risk
profiles, position within the industry, and with historical share price information sufficient to meet the
expected life of the stock-based awards. The Company computes the historical volatility data using the
daily closing prices for the selected companies’ shares during the equivalent period of the calculated
expected term of its stock-based awards. 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 is calculated 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 its stock options to provide a basis for an estimate. Under
this approach, the weighted-average expected life is presumed to be the average of the contractual term
of ten years and the weighted-average vesting term of the stock options, taking into consideration
multiple vesting tranches;
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. The measurement date for non-employee awards is the date of grant. Stock - based awards
subject to service - based vesting conditions are expensed on a straight - line basis over the vesting period.
The purchase price of common stock under the Company’s 2015 employee stock purchase plan (as amended,
the 2015 ESPP) is equal to 85% of the lesser of (i) the fair market value per share of the common stock on the first
business day of an offering period and (ii) the fair market value per share of the common stock on the purchase date. The
fair value of the discounted purchases made under 2015 ESPP is calculated using the Black-Scholes valuation model.
The fair value of the look-back provision plus the 15% discount is recognized as compensation expense over the 180-day
purchase 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-17
Foreign currency translation
The financial statements of each of the Company’s subsidiaries with a functional currency other than the U.S.
dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates
for stockholders’ equity and weighted average exchange rates for operating results. Translation gains and losses are
included in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains
and losses are included in other (expense) income, net in the results of operations.
Reclassifications
Certain items in the prior year’s consolidated financial statements have been reclassified to conform to the current
presentation.
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, accounts receivable and unbilled account
receivables.
The Company maintains its cash, cash equivalents and investments in a custodian account at high quality
financial institutions, and as of December 31, 2019 and 2018, substantially all the Company’s cash, cash equivalents and
investments were invested in money market funds and U.S. government agency and treasury obligations, and
consequently, the Company believes that such funds are subject to minimal credit risk. The Company has adopted an
investment policy that limits the amounts the Company may invest in any one type of investment. The Company has not
experienced any credit losses and does not believe it is exposed to any significant credit risk on these funds.
Accounts receivables and unbilled accounts receivables represent amounts due from the Company’s
collaboration partners. The Company monitors economic conditions to identify facts or circumstances that may indicate
that its receivables 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 in the U.S. and Europe. All material long-lived
assets of the Company reside in the U.S.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies
that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not
believe that the adoption of recently issued standards have or may have a material impact on its consolidated financial
statements and disclosures.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), a new standard
issued to increase transparency and comparability among organizations related to their leasing activities. This standard
established a right-of-use model that requires all lessees to recognize right-of-use assets and lease liabilities on their
balance sheet that arise from leases as well as provide disclosures with respect to certain qualitative and quantitative
F-18
information related to a company's leasing arrangements to meet the objective of allowing users of financial statements
to assess the amount, timing and uncertainty of cash flows arising from leases.
The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date
and transition date: ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic
842, ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842):
Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvement for Lessors, and ASU No. 2019-01, Leases
(Topic 842): Codification Improvements. The Company adopted these amendments with ASU 2016-02 (collectively, the
new leasing standards, or ASC 842) effective January 1, 2019.
As permitted by the new leasing standards, the Company elected to adopt ASC 842 using the modified
retrospective transition approach, with no restatement of prior periods or cumulative adjustment to retained earnings, and
therefore, the consolidated balance sheet prior to January 1, 2019 continues to be reported under ASC Topic 840, Leases,
(ASC 840), which did not require the recognition of operating lease liabilities on the balance sheet, and is not
comparative.
Upon adoption of the new leasing standards under ASC 842, the Company elected the package of transition
practical expedients, which allowed it to carry forward prior conclusions related to whether any expired or existing
contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for
existing leases. The leases that were classified as operating leases under ASC 840 were classified as operating leases
under ASC 842, and the accounting for finance leases (capital leases) was substantially unchanged. The Company
elected to apply the practical expedient not to separate lease and non-lease components for new and modified leases
commencing after adoption. The Company also made an accounting policy election to not recognize leases with an
initial term of 12 months or less within the consolidated balance sheets and to recognize those lease payments on a
straight-line basis in the consolidated statements of operations over the lease term.
Impact of Adoption of ASC 842
Upon adoption of the new leasing standards under ASC 842, the Company recognized an adjustment of $54.2
million and $74.1 million to operating lease right-of-use assets and the related lease liabilities, respectively. The
operating lease liabilities are based on the present value of the remaining minimum lease payments discounted using the
Company’s secured incremental borrowing rate at the effective date of January 1, 2019. The adoption of the new leasing
standards did not have an impact on the Company’s consolidated statements of operations.
The impact of the adoption of ASC 842 on the consolidated balance sheet was as follows:
Impact of ASC 842 Adoption on Consolidated
Balance Sheet as of January 1, 2019
(in thousands)
Operating lease right-of-use assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of lease incentive obligation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities, net of current portion . . . . . . . . . . . . . . . . . . . . . . . .
Lease incentive obligation, net of current portion . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances
without
adoption of
ASC 842
ASC 842
Adjustment
— $
540,124
51,711
—
1,714
60,323
5,130
—
12,903
121,115
54,245 $
54,245
(125)
4,730
(1,714)
2,891
(5,130)
69,387
(12,903)
54,245
Balances with
adoption of
ASC 842
54,245
594,369
51,586
4,730
—
63,214
—
69,387
—
175,360
F-19
Leases Accounting Policy
For contracts entered into on or after the effective date, at the inception of a contract, the Company assesses
whether the contract is, or contains, a lease. The assessment is based on: (1) whether the contract involves the use of a
distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use
of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. At inception
of a lease, the Company allocates the consideration in the contract to each lease component based on its relative stand-
alone price to determine the lease payments.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any
one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease
contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the
remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair
value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria.
For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The
right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present
value of the lease payments under the lease.
The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease
liability, plus any initial direct costs incurred if any, less any lease incentives received. All right-of-use assets are
reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the secured incremental
borrowing rate for the same term as the underlying lease.
Lease payments included in the measurement of the lease liability comprise the following: the fixed
noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period
will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be
terminated early.
Lease cost for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage
commissions, and is recognized on a straight-line basis over the lease term. Included in lease cost are any variable lease
payments incurred in the period that are not included in the initial lease liability and lease payments incurred in the
period for any leases with an initial term of 12 months or less. Lease cost for finance leases consists of the amortization
of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost
basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The FASB has subsequently issued
amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. These
standards require that credit losses be reported using an expected losses model rather than the incurred losses model that
is currently used, and establish additional disclosures related to credit risks. For available-for-sale debt securities with
unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the
investment.
The Company adopted the new standard on January 1, 2020 and has substantially completed the assessment of
the standard based on the composition of its portfolio of financial instruments and current and forecasted economic
conditions as of January 1, 2020. The Company has substantially completed its calculations for credit losses and
established processes and internal controls that are required to comply with the new credit loss standard and related
disclosure requirements. The Company does not expect the adoption of this standard to have a significant impact on its
consolidated financial position and results of operations.
F-20
Debt Securities
In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs
(Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This standard amends the
amortization period for certain purchased callable debt securities held at a premium by shortening the amortization
period to the earliest call date. This standard became effective for the Company on January 1, 2019, and was adopted
using a modified retrospective transition approach. The adoption of this standard did not result in a significant
adjustment to the Company’s marketable debt securities.
Fair Value Measurements
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
Framework Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain
disclosure requirements on fair value measurements. This standard was effective for the Company on January 1, 2020.
The Company does not expect that the adoption of this standard to have a material impact on the disclosures of its
consolidated financial statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying
the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative
arrangements as follows:
• Clarifies that certain transactions between collaborative arrangement participants should be accounted
for as revenue under ASC 606, when the collaborative arrangement participant is a customer in the
context of a unit of account. In those situations, all the guidance in ASC 606 should be applied,
including recognition, measurement, presentation and disclosure requirements;
• Adds unit-of-account guidance to ASC 808, to align with the guidance in ASC 606 (that is, a distinct
good or service) when an entity is assessing whether the collaborative arrangement or a part of the
arrangement is within the scope of ASC 606; and
• Requires that in a transaction with a collaborative arrangement participant that is not directly related to
sales to third parties, presenting that transaction together with revenue recognized under ASC 606 is
precluded if the collaborative arrangement participant is not a customer.
The standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption
permitted. A retrospective transition approach is required for either all contracts or only for contracts that are not
completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings. The
Company adopted the new standard on January 1, 2020 and does not expect the adoption of this standard to have a
significant impact on its consolidated financial position and results of operations.
Internal-Use Software
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That
Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. The
standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted,
and can be adopted prospectively or retrospectively.
The Company adopted the new standard on January 1, 2020 on a prospective basis and is continuing to
establish new processes and internal controls that may be required to comply with the new cloud computing standard.
The Company does not expect the adoption of this standard to have a significant impact on its consolidated financial
position and results of operations; however, the adoption of this standard will result in an increase in capitalized assets
related to qualifying cloud computing arrangement implementation costs incurred after the adoption date.
F-21
3. Cash Equivalents and Investments
Cash equivalents and investments, available-for-sale, consisted of the following at December 31, 2019 and
December 31, 2018 (in thousands):
December 31, 2019
Cash equivalents:
Amortized Unrealized Unrealized
Gain
Losses
Cost
Fair
Value
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 113,938 $
— $
— $ 113,938
Investments, available-for-sale:
U.S. government agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128,156
305,360
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 547,454 $
160
358
518 $
128,312
(4)
(8)
305,710
(12) $ 547,960
December 31, 2018
Cash equivalents:
Amortized Unrealized Unrealized
Gain
Losses
Cost
Fair
Value
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,064 $
— $
— $ 68,064
Investments, available-for-sale:
U.S. government agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99,940
326,172
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 494,176 $
99,860
(80)
—
—
326,088
(84)
— $ (164) $ 494,012
At December 31, 2019 and 2018, the Company held 11 and 54 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, 2019 and 2018 were $82.1 million and $397.5 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, 2019 and 2018.
As of December 31, 2019, 9 securities with an aggregate fair value of $64.4 million had remaining maturities
greater than one year. No available-for-sale securities held as of December 31, 2018 had remaining maturities greater
than one year.
4. Fair Value of Financial Instruments
The following table summarizes the Company’s cash equivalents and marketable securities measured at fair
value on a recurring basis as of December 31, 2019 (in thousands):
Description
Financial Assets
Cash equivalents:
December 31,
2019
Active
Markets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 113,938 $ 113,938 $
— $
Investments, available-for-sale:
U.S. government agency securities . . . . . . . . . . . . . . . . . . . . . .
U.S. treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128,312
305,710
—
305,710
128,312
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 547,960 $ 419,648 $ 128,312 $
—
—
—
—
F-22
The following table summarizes the Company’s cash equivalents and marketable securities measured at fair
value on a recurring basis as of December 31, 2018 (in thousands):
Description
Financial Assets
Cash equivalents:
December 31,
2018
Active
Markets
(Level 1)
Observable Unobservable
Inputs
(Level 2)
Inputs
(Level 3)
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
68,064 $ 68,064 $
— $
Investments, available-for-sale:
U.S. government agency securities . . . . . . . . . . . . . . . . . . . . . . . .
U.S. treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99,860
326,088
99,860
326,088
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 494,012 $ 494,012 $
—
—
— $
—
—
—
—
5. Restricted Cash
At December 31, 2019 and 2018, respectively, $5.7 million and $5.4 million, of the Company’s cash is
restricted by a bank primarily related to security deposits for the lease agreements for the Company’s current and former
corporate headquarters.
For additional information on these security deposits, see Note 14, Leases.
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
$
As of December 31,
2018
2019
8,975 $ 6,232
2,369
3,512
1,805
1,558
26,640
36,627
280
417
956
956
38,282
52,045
(8,655)
(13,684)
$ 38,361 $ 29,627
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Depreciation
expense for the years ended December 31, 2019, 2018 and 2017 was $5.3 million, $4.2 million and $1.6 million,
respectively.
7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
External research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,420 $ 36,213
8,071
Employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,423
Accrued professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
912
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,092
$ 88,706 $ 51,711
13,519
12,042
906
2,819
As of December 31,
2018
2019
F-23
8. Collaboration and License Agreement
Clementia
On October 15, 2019, the Company entered into a license agreement (the Clementia agreement) with Clementia
Pharmaceuticals, Inc. (Clementia), a wholly-owned subsidiary of Ipsen S.A. Under the Clementia agreement, the
Company granted an exclusive, worldwide, royalty-bearing license to Clementia to develop and commercialize BLU-
782, the Company’s oral, highly selective investigational ALK2 inhibitor in Phase 1 clinical development for the
treatment of fibrodysplasia ossificans progressive (FOP), as well as specified other compounds related to the BLU-782
program.
The Company received an upfront cash payment of $25.0 million, and subject to the terms of the Clementia
agreement, the Company will be eligible to receive up to $510.0 million in milestone and other payments, including a
$20.0 million cash milestone payment due in the third quarter of 2020 and up to $490.0 million in other payments and
potential development, regulatory and sales-based milestone payments for licensed products. In addition, Clementia is
obligated to pay to the Company royalties on aggregate annual worldwide net sales of licensed products at tiered
percentage rates ranging from the low- to mid-teens, subject to adjustment in specified circumstances under the
Clementia agreement, and to purchase specified manufacturing inventory from the Company for a total of $1.5 million.
Unless earlier terminated in accordance with the terms of the Clementia agreement, the agreement will expire
on a country-by-country, licensed product-by-licensed product basis on the date when no royalty payments are or will
become due. Clementia may terminate the agreement at any time on or after the second anniversary of the effective date
of the agreement upon at least 12 months’ prior written notice to the Company, which cannot be delivered before the
first anniversary of the effective date. Either party may terminate the 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 Clementia licensed products.
The Company evaluated the Clementia agreement under ASC 606 as the agreement represented a transaction
with a customer. The Company identified the following material promises under the agreement: (1) the exclusive license
to develop, manufacture and commercialize BLU-782; (2) the technology transfer of BLU-782 program; (3) the transfer
of existing manufacturing inventory; and (4) the transfer of in-process manufacturing inventory. In addition, the
Company determined that the exclusive license and technology transfer were not distinct from each other, as exclusive
license has limited value without the corresponding technology transfer. As such, for the purposes of ASC 606, the
Company determined that these four material promises, described above, should be combined into three performance
obligations: (1) the exclusive license and the technology transfer; (2) the transfer of existing manufacturing inventory;
and (3) the transfer of in-process manufacturing inventory.
The Company determined that the transaction price as of the outset of the arrangement was $46.5 million,
which consists of the upfront amount of $25.0 million, the $20.0 million cash milestone payment due in the third quarter
of 2020, the purchase of existing manufacturing inventory of $1.2 million and the purchase of in-process manufacturing
inventory of $0.3 million. The other potential milestone payments that the Company is eligible to receive were excluded
from the transaction price, as all milestone amounts were fully constrained based on the probability of achievement. The
transaction price was allocated to the three performance obligation on a relative stand-alone selling price basis. The
Company satisfies the performance obligations upon delivery of the license and completion of the technology transfer
and inventory transfers.
As of December 31, 2019, the Company completed the delivery of the license, the technology transfer and the
transfer of existing manufacturing inventory and recognized a total of $46.2 million as revenue, of which $20.0 million
cash milestone payment due in the third quarter of 2020 was recorded as unbilled accounts receivable. There was no
revenue deferred as a contract liability associated with the Clementia agreement as of December 31, 2019 and 2018.
CStone Pharmaceuticals
On June 1, 2018, the Company entered into a collaboration and license agreement (the CStone agreement) with
CStone Pharmaceuticals (CStone) pursuant to which the Company granted CStone exclusive rights to develop and
commercialize the Company’s drug candidates avapritinib, pralsetinib and fisogatinib, including back-up forms and
certain other forms thereof, in Mainland China, Hong Kong, Macau and Taiwan (each, a CStone region and collectively,
F-24
the CStone territory), either as a monotherapy or as part of a combination therapy. The Company retains exclusive rights
to the licensed products outside the CStone territory.
The Company received an upfront cash payment of $40.0 million, and subject to the terms of the CStone
agreement, will be eligible to receive up to approximately $346.0 million in milestone payments, including $118.5
million related to development and regulatory milestones and $227.5 million related to sales-based milestones. In
addition, CStone will be obligated to pay the Company tiered percentage royalties on a licensed product-by-licensed
product basis ranging from the mid-teens to low twenties on annual net sales of each licensed product in the CStone
territory, subject to adjustment in specified circumstances. CStone will be responsible for costs related to the
development of the licensed products in the CStone territory, other than specified costs related to the development of
fisogatinib as a combination therapy in the CStone territory that will be shared by the Company and CStone.
Pursuant to the terms of the CStone agreement, CStone will be responsible for conducting all development and
commercialization activities in the CStone territory related to the licensed products, and the Company and CStone have
initiated a clinical trial in China evaluating fisogatinib in combination with CS1001, a clinical-stage anti-programmed
death ligand-1 immunotherapy being developed by CStone, as a first-line therapy for the treatment of patients with
hepatocellular carcinoma.
The CStone agreement will continue on a licensed product-by-licensed product and CStone region-by-CStone
region basis until the later of (i) 12 years after the first commercial sale of a licensed product in a CStone region in the
CStone territory and (ii) the date of expiration of the last valid patent claim related to the Company’s patent rights or any
joint collaboration patent rights for the licensed product that covers the composition of matter, method of use or method
of manufacturing such licensed product in such region. Subject to the terms of the CStone agreement, CStone may
terminate the CStone agreement in its entirety or with respect to one or more licensed products for convenience by
providing written notice to the Company after June 1, 2019, and CStone may terminate the CStone agreement with
respect to a licensed product for convenience at any time by providing written notice to the Company following the
occurrence of specified events. In addition, the Company may terminate the CStone agreement under specified
circumstances if CStone or certain other parties challenges the Company’s patent rights or any joint collaboration patent
rights or if CStone or its affiliates do not conduct any material development or commercialization activities with respect
to one or more licensed products for a specified period of time, subject to specified exceptions. Either party may
terminate the CStone agreement for the other party’s uncured material breach or insolvency. In certain termination
circumstances, the parties are entitled to retain specified licenses to be able to continue to exploit the licensed products,
and in the event of termination by CStone for the Company’s uncured material breach, the Company will be obligated to
pay CStone a low single digit percentage royalty on a licensed product-by-licensed product basis on annual net sales of
such licensed product in the CStone territory, subject to a cap and other specified exceptions.
The Company evaluated the CStone agreement to determine whether it is a collaborative arrangement for
purposes of ASC 808. The Company determined that there were two material components of the CStone agreement:
(i) the CStone territory-specific license and related activities in the CStone territory, and (ii) the parties’ participation in
global development of the licensed products. The Company concluded that the CStone territory-specific license and
related activities in the CStone territory are not within the scope of ASC 808 because the Company is not exposed to
significant risks and rewards. The Company concluded that CStone is a customer with regard to the component that
includes the CStone territory-specific license and related activities in CStone territory, which include manufacturing. For
the parties’ participation in global development of the licensed products, the Company concluded that the research and
development activities and cost-sharing payments related to such activities are within the scope of ASC 808 as both
parties are active participants exposed to the risk of the activities under the CStone agreement. The Company concluded
that CStone is not a customer with regard to the global development component in the context of the CStone agreement.
Therefore, payments received by the Company for global development activities under the CStone agreement, including
manufacturing, will be accounted for as a reduction of related expenses.
A summary of manufacturing services related to the global development activities during the years ended
December 31, 2019 and 2018 is as follows (in thousands):
Manufacturing services related to global development activities . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,286 $
496
Year Ended December 31,
2019
2018
F-25
The Company evaluated the CStone territory-specific license and related activities in the CStone territory under
ASC 606 as these transactions are considered transactions with a customer. The Company identified the following
material promises under the arrangement: (1) the three exclusive licenses granted in the CStone territory to develop,
manufacture and commercialize the three licensed products; (2) the initial know-how transfer for each licensed product;
(3) manufacturing activities related to development and commercial supply of the licensed products; (4) participation in
the joint steering committee (JSC) and joint project teams (JPT); (5) regulatory responsibilities; and (6) manufacturing
technology and continuing know-how transfers. The Company determined that each licensed product is distinct from the
other licensed products. In addition, the Company determined that the exclusive licenses and initial know-how transfers
for each licensed product were not distinct from each other, as each exclusive license has limited value without the
corresponding initial know-how transfer. For purposes of ASC 606, the Company determined that that participation on
the JSC and JPTs, the regulatory responsibilities and the manufacturing technology and continuing know-how transfers
are qualitatively and quantitatively immaterial in the context of the CStone agreement and therefore are excluded from
performance obligations. As such, the Company determined that these six material promises, described above, should be
combined into one performance obligation for each of the three candidates.
The Company evaluated the provision of manufacturing activities related to development and commercial
supply of the licensed products as an option for purposes of ASC 606 to determine whether these manufacturing
activities provide CStone with any material rights. The Company concluded that the manufacturing activities were not
issued at a significant and incremental discount, and therefore do not provide CStone with any material rights. As such,
the manufacturing activities are excluded as performance obligations at the outset of the arrangement.
Based on these assessments, the Company identified three distinct performance obligations at the outset of the
CStone agreement, which consists of the following for each licensed product: (1) the exclusive license and (2) the initial
know-how transfer.
Under the CStone agreement, in order to evaluate the transaction price for purposes of ASC 606, the Company
determined that the upfront amount of $40.0 million constituted the entirety of the consideration to be included in the
transaction price as of the outset of the arrangement, which was allocated to the three performance obligations. The
potential milestone payments that the Company is eligible to receive were excluded from the transaction price, as all
milestone amounts were fully constrained based on the probability of achievement. The Company satisfied the
performance obligations upon delivery of the licenses, initial know-how transfers and product trademark and recognized
the upfront payment of $40.0 million as revenue during the second quarter of 2018.
The Company will reevaluate the transaction price at the end of each reporting period and as uncertain events
are resolved or other changes in circumstances occur, and if necessary, the Company will adjust its estimate of the
transaction price, and any addition to the transaction price would be recognized as revenue when it becomes probable
that inclusion would not lead to a significant revenue reversal. During the year ended December 31, 2019, several
development and regulatory milestones were achieved and the associated aggregate cash consideration of $12.0 million
for such milestones was added to the estimated transaction price for the CStone agreement.
A summary of revenue recognized under the CStone agreement during the years ended December 31, 2019 and
2018 is as follows (in thousands):
License milestone revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,000 $ 40,000
Manufacturing services related to territory-specific activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total CStone collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,144 $ 40,000
144
Year Ended
December 31,
2019
2018
F-26
The following table presents the receivables including the contract assets associated with the CStone agreement
as of December 31, 2019 and 2018 (in thousands):
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unbilled accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
663 $
—
2,749 $ 151
There was no revenue deferred as a contract liability associated with the CStone agreement as of December 31,
As of December 31,
2018
2019
2019 and 2018.
Roche
In March 2016, the Company entered into a collaboration and license agreement (as amended, Roche
agreement) with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (collectively, Roche) for the discovery,
development and commercialization of small molecule therapeutics targeting kinases believed to be important in cancer
immunotherapy, as single products or possibly in combination with other therapeutics. As a result of an amendment to
the Roche agreement in the fourth quarter of 2019, the parties are currently conducting activities for up to four programs
under the collaboration.
Under the Roche agreement, Roche was initially 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 two collaboration programs, if Roche exercises
its option, Roche will receive worldwide, exclusive commercialization rights for the licensed products. For up to two
collaboration programs, if Roche exercises its option, the Company will retain commercialization rights in the U.S. for
the licensed products, and Roche will receive commercialization rights outside of the U.S. 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 U.S.
The Company 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, the Company will be eligible to receive up to approximately
$940.0 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 $190.0 million are for
option fees and milestone payments for research, pre-clinical and clinical development events prior to licensing across
all four potential collaboration programs.
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 U.S., 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
F-27
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 assessed this arrangement in accordance with ASC 606 upon the adoption of the new standard on
January 1, 2018, and concluded that the contract counterparty, Roche, is a customer prior to the exercise, if any, of an
option by Roche. The Company identified the following material promises under the arrangement: (1) a non-
transferable, sub-licensable and non-exclusive license to use the Company’s intellectual property and collaboration
compounds to conduct research activities; (2) research and development activities through Phase 1 clinical trials under
the research plan; (3) five option rights for licenses to develop, manufacture, and commercialize the collaboration
targets; (4) participation on a joint research committee (JRC) and joint development committee (JDC); and (5) regulatory
responsibilities under Phase 1 clinical trials. The Company determined that the license and research and development
activities were not distinct from another, as the license has limited value without the performance of the research and
development activities. Participation on the JRC and JDC to oversee the research and development activities was
determined to be quantitatively and qualitatively immaterial and therefore is excluded from performance obligations.
The regulatory responsibilities related to filings and obtaining approvals related to the drugs that may result from each
program do not represent separate performance obligations based on their dependence on the research and development
efforts. As such, the Company determined that these promises should be combined into a single performance obligation.
The Company evaluated the option rights for licenses to develop, manufacture, and commercialize the
collaboration targets to determine whether it provides Roche with any material rights. The Company concluded that the
options were not issued at a significant and incremental discount, and therefore do not provide material rights. As such,
they are excluded as performance obligations at the outset of the arrangement.
Based on these assessments, the Company identified one performance obligation at the outset of the Roche
agreement, which consists of: (1) the non-exclusive license; (2) the research and development activities through Phase 1;
and (3) regulatory responsibilities under Phase 1 clinical trials.
Under the Roche agreement, in order to evaluate the appropriate transaction price, the Company determined
that as of January 1, 2018, the upfront amount of $45.0 million constituted the entirety of the consideration to be
included in the transaction price as of the outset of the arrangement, which was allocated to the single performance
obligation. The option exercise payments that may be received are excluded from the transaction price until each
customer option is exercised as it was determined that the options are not material rights. The potential milestone
payments that the Company is eligible to receive prior to the exercise of the options were initially excluded from the
transaction price, as all milestone amounts were fully constrained based on the probability of achievement. The
Company will reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or
other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.
In June 2018 and October 2019, the Company achieved a $10.0 million research and milestone payment and an
$8.0 million research milestone payment under the Roche agreement. These amounts were added to the estimated
transaction price and allocated to the existing performance obligation as it became probable that a significant reversal of
cumulative revenue would not occur for each of the research milestones achieved.
The Company recognizes revenue associated with the performance obligation as the research and development
services are provided using an input method, according to the costs incurred as related to the research and development
activities on each program and the costs expected to be incurred in the future to satisfy the performance obligation. The
transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards
satisfying the performance obligation. The amounts received that have not yet been recognized as revenue are deferred
as a contract liability on the Company’s consolidated balance sheet and will be recognized over the remaining research
and development period until the performance obligation is satisfied.
During the year ended December 31, 2019, as a result of an amendment to the Roche agreement, a reduction in
the costs expected to be incurred in the future to satisfy certain performance obligations under the collaboration became
F-28
probable, and accordingly, the Company recorded a cumulative catch-up of $1.6 million to revenue; In addition, due to
the achievement of the $8.0 million research milestone in October 2019, the Company recognized another cumulative
catch-up of $1.6 million to revenue.
A summary of revenue recognized under the Roche agreement during the years ended December 31, 2019 and
2018 is as follows (in thousands):
Roche collaboration research and development services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,165 $ 4,521
During the years ended December 31, 2019 and 2018, the Company recognized the following revenue due to
the changes in the contract liability balances (in thousands):
Year Ended
December 31,
2019
2018
Year Ended
December 31,
2019
2018
Amounts included in the contract liability at the beginning of the period . . . . . . . . . . . . . . . . . . . . $ 4,578 $ 4,277
As of December 31, 2019, the Company had revenue deferred as a contract liability related to the Roche
agreement of $46.1 million, of which $6.2 million was included in current liabilities, and the research and development
services related to the performance obligation are expected to be performed over a remaining period of approximately
5.3 years. As of December 31, 2018, the Company had revenue deferred as a contract liability related to the Roche
agreement of $46.2 million, of which $3.6 million was included in current liabilities.
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 FOP. Since the Alexion agreement was terminated in October 2017, the Company recognized
revenue from the agreement in accordance with ASC 605.
Prior to the termination, the Company had received an aggregate amount of $18.8 million in upfront and
milestone payments, which consisted of a $15.0 million non-refundable upfront payment upon execution of the Alexion
agreement and an aggregate amount of $3.8 million in pre-clinical milestone payments. The Company was not entitled
to receive payment from Alexion for any research and development expenses incurred after October 24, 2017 and as a
result, the Company did not recognize any revenue under the Alexion agreement for the year ended December 31, 2018.
During the year ended December 31, 2017, the Company recognized $16.2 million revenue under the Alexion
agreement, of which $9.5 million related to reimbursable research and development costs and $6.7 million related to the
remaining portion of the upfront and milestone payments previously received.
9. Term Loan
In May 2013, the Company entered into a loan and security agreement with Silicon Valley Bank, 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 loan to allow the Company to
borrow an additional $5.0 million. The Company accounted for the amendment as a modification to the existing 2013
loan. The Company immediately drew the additional $5.0 million 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 was required to pay a fee of 4% of the total loan advances at the end of the term
of each of the loan. The fee had been accreted to interest expense over the term of the loan. As of December 31, 2019
and 2018, the Company had no outstanding principal and interest under the loan and security agreement.
F-29
10. Stock-based Compensation
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 years beginning January 1, 2019 and 2020, the number of shares reserved for issuance
under the 2015 Plan was increased by 1,761,481 and 1,970,888 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 the
Company’s capitalization. At December 31, 2019, there were 1,364,378 shares available for future grant under the 2015
Plan.
Stock-based Compensation Expense
The Company recognized stock-based compensation expense totaling $54.7 million, $30.5 million and $12.5
million for the year ended December 31, 2019, 2018 and 2017, respectively.
Stock-based compensation expense by award type included within the consolidated statements of operations
and comprehensive loss was as follows (in thousands):
Year Ended
December 31,
2018
2017
2019
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,726 $ 30,095 $ 12,317
—
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204
Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,653 $ 30,534 $ 12,523
6,445
—
482
167
—
272
Stock - based compensation expense by classification within the consolidated statements of operations and
comprehensive loss is as follows (in thousands):
Year Ended
December 31,
2018
2019
2017
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,596 $ 17,019 $ 6,296
6,227
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,057
13,515
Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,653 $ 30,534
$ 12,523
At December 31, 2019, there was $160.6 million of total unrecognized compensation cost related to non-vested
stock awards, which is expected to be recognized over a weighted - average period of 2.9 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.
Stock Options
Stock options 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. The fair value of each option issued
F-30
to employees was estimated at the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
Year Ended December 31,
2018
2.77 %
— %
6.0
69.08 %
2.21 %
— %
6.0
63.83 %
2017
2.07 %
— %
6.0
74.58 %
The following table summarizes the stock option activity for the year ended December 31, 2019:
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,063,081
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(544,065)
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(281,106)
Outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,557,800 $ 44.64
82.20
22.30
71.24
Outstanding at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,795,710 $ 58.82
Exercisable at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,755,865 $ 40.20
7.69 $ 134,409
6.56 $ 111,895
Weighted- Remaining Aggregate
Intrinsic
Contractual
Average
Life
Exercise
Value(1)
(in thousands)
(in Years)
Price
86,675
7.96 $
Shares
(1)
Intrinsic value represents the amount by which the fair market value as of December 31, 2019 of the underlying
common stock exceeds the exercise price of the option.
The weighted - average grant date fair value of options granted in the years ended December 31, 2019, 2018 and
2017 was $48.96, $49.40 and $28.04, respectively. The total intrinsic value of options exercised in the years ended
December 31, 2019, 2018, and 2017 was $33.8 million, $29.4 million, and $17.8 million, respectively.
At December 31, 2019, the total unrecognized compensation expense related to unvested stock option awards
was $132.0 million, which is expected to be recognized over a weighted-average period of approximately 2.8 years.
Restricted stock units
Restricted stock units granted by the Company generally vest ratably over four years. The following table
summarizes the restricted stock units activity for the year ended December 31, 2019:
Weighted-Average
Grant Date
Fair Value
Shares
Unvested shares at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,868 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413,499
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,246)
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,366)
Unvested shares at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419,755 $
66.28
83.58
66.55
81.57
82.50
The Company started to grant restricted stock units to employees in June 2018. The total fair value of restricted
stock units vested during the year ended December 31, 2019 was $0.7 million and there were no restricted stock units
vested during the year ended December 31, 2018. At December 31, 2019, the total unrecognized compensation expense
related to unvested restricted stock units was $28.6 million, which is expected to be recognized over a weighted-average
period of approximately 3.2 years.
F-31
Restricted Stock Awards
Restricted stock awards granted by the Company generally vest ratably over four years. The Company did not
grant restricted stock awards to any employees or directors during the years ended December 31, 2019 or 2018.
Outstanding restricted stock awards previously granted to employees and directors were fully vested as of December 31,
2017. The total fair value of restricted stock awards that vested during the years ended December 31, 2017 was $0.1
million.
2015 Employee Stock Purchase Plan
In 2015, the Company’s board of directors and stockholders approved 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 years beginning January 1, 2019 and 2020,
the number of shares reserved for issuance under the 2015 ESPP was increased by 440,370 and 492,722 shares,
respectively. The Company issued 20,724, 13,878, and 16,703 shares under the ESPP during the years ended
December 31, 2019, 2018 and 2017, respectively.
11. Net Loss per Share
Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the
period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting
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 calculation, stock options, unvested restricted stock units and ESPP shares are
considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share, as their
effect would be anti - dilutive; therefore, basic and diluted net loss per share 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 for
the periods indicated because including them would have had an anti - dilutive effect.
Year Ended
December 31,
2018
2017
2019
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,795,710 4,557,800 3,304,166
—
36,868
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,663
ESPP shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,275
3,309,829
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,229,086 4,604,943
419,755
13,621
12. Convertible Preferred Stock
Under the Company’s certificate of incorporation, the board of directors is 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. No shares of preferred stock were issued and outstanding during years ended
December 31, 2019, 2018 and 2017.
F-32
13. 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, 2019, 2018 and 2017.
Year Ended
December 31,
2018
Federal income tax (benefit) at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.11
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.77
Federal research and development credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal orphan drug credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.90
State income tax, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.46
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.13
Foreign rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.03)
Deferred rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.08)
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39.26)
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2019
21.00 % 21.00 % 34.00 %
1.71
1.79
18.06
7.08
0.04
—
—
(49.68)
0.49
0.97
6.40
5.40
0.83
—
(27.58)
(20.54)
— %
— %
(0.03)%
The Company had net losses in all periods presented and therefore has not recognized any federal or state
income tax expense.
During 2018, the Company completed a detailed study of its research and development credits and orphan drug
credit carryforwards. As a result, the Company adjusted its deferred tax asset balances and the impacts are included on
the Federal research and developmental credit and Federal orphan drug credit lines in the effective rate reconciliation
above. The impacts of the increases in the deferred tax asset balances have been completely offset by an increase in the
Company's valuation allowance which is included in the change in valuation allowance line on the reconciliation above.
The Company’s deferred tax assets and liabilities consist of the following:
Deferred tax assets:
Year Ended
December 31,
2018
2019
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 219,935 $ 127,421 $
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
13,714
68,536
12,248
10,320
3,993
1,436
237,668
19,240
92,538
25,842
10,971
—
26,196
394,722
2017
78,829
5,950
14,574
4,660
9,664
4,462
1,142
119,281
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(4,474)
(19,869)
—
(370,379)
(4,162)
—
—
(233,506)
— $
— $
(4,801)
—
(2)
(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 $370.4 million, $233.5 million and $114.5 million
has been established at December 31, 2019, 2018 and 2017, respectively. The change in the valuation allowance was
$136.9 million, $119.0 million and $30.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The Company has incurred net operating losses (NOL) since inception. At December 31, 2019, the Company had federal
and state NOL carryforwards of $802.1 million and $817.4 million, respectively, which expire beginning in 2030. As of
F-33
December 31, 2019, the Company had federal and state research and development tax credit carryforwards of
$11.2 million and $9.4 million, respectively, which expire beginning in 2027. As of December 31, 2019, the Company
had federal orphan drug credits of $92.5 million, which expire beginning in 2035 and state investment tax credits of $0.8
million, which expire beginning in 2021.
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, 2019 and 2018, the
Company has no accrued interest related to uncertain tax positions. As of December 31, 2018, the Company was open to
examination in the U.S. federal and certain state jurisdictions for all of the Company’s tax years since the net operating
losses may potentially be utilized in future years to reduce taxable income. 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.
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 year ended December 31, 2016. The change in the U.S. federal corporate tax rate, which was effective January 1,
2018, was also reflected in the Company’s deferred tax table above.
As permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and
Jobs Act, the Company recorded provisional estimates during the year ended December 31, 2018, and has subsequently
finalized its accounting analysis based on the guidance, interpretations, and data available as of December 31, 2019.
Adjustments made in the fourth quarter of 2018 upon finalization of its accounting analysis were not material to the
Company’s consolidated financial statements.
14. Leases
38 Sidney Street
On February 12, 2015, the Company entered into a lease for approximately 38,500 rentable square feet of office
and laboratory space at 38 Sidney Street in Cambridge, Massachusetts, which the Company gained control over on
June 15, 2015, and occupancy commenced in October 2015. The initial term of the lease agreement will expire on
October 31, 2022, unless terminated sooner. 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 initial 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 lease provided the Company with an allowance for leasehold improvements of $4.3 million. Prior to
adoption of ASC 842, the Company recorded rent expense on a straight-line basis through the end of the lease term and
the associated deferred rent on the consolidated balance sheet. The Company also recorded the leasehold improvement
incentives as a reduction to rent expense ratably over the lease term, and the balance from the leasehold improvement
incentives was included in lease incentive obligations on the consolidated balance sheet as of December 31, 2018. The
lease agreement required the Company to pay a security deposit of $1.3 million, of which $0.2 million was released in
February 2018 and February 2019, respectively. The remaining $0.9 million is recorded in restricted cash on the
Company’s consolidated balance sheet as of December 31, 2019.
F-34
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 by the sublessee of $8.2 million over the 32 month
term of the sublease agreement. During the 32 month term, the Company will be responsible for total rental payments of
$6.9 million and an additional $0.7 million in total payments related to the Company’s profit on the sublease income
which are payable by the Company to the landlord. As of December 31, 2019, the remaining minimum sublease rental
commitment by the sublessee was $2.6 million.
45 Sidney Street
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, unless terminated sooner. 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.
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 increases annually until it reaches approximately $10.6 million in the last year of the
initial term. The lease provided the Company with a tenant improvement allowance of approximately $14.2 million for
improvements to be made to the premises. Prior to adoption of ASC 842, the Company recorded rent expense on a
straight-line basis through the end of the lease term and the associated deferred rent on the consolidated balance sheet.
The Company also recorded the leasehold improvement incentives as a reduction to rent expense ratably over the lease
term, and the balance from the leasehold improvement incentives was included in lease incentive obligations on the
consolidated balance sheet as of December 31, 2018. The lease agreement required the Company to pay a security
deposit of $3.5 million, of which $3.0 million is recorded in restricted cash on the Company’s consolidated balance sheet
as of December 31, 2019, and $0.5 million was recorded in prepaid and other current assets, which was subsequently
released in January 2020.
On September 19, 2018, the Company entered into an amendment to the lease agreement for its office and
laboratory space located at 45 Sidney Street in Cambridge, Massachusetts to expand the rentable square footage from
approximately 99,833 square feet to approximately 139,216 square feet. The initial term of the lease with respect to the
expansion premises commenced on March 1, 2019 and will expire on November 30, 2029, unless terminated sooner.
Pursuant to the lease amendment, the rent commencement date for the expansion premises was July 1, 2019.
The Company has agreed to pay an initial annual base rent of approximately $3.2 million for the expansion
premises, which increases annually until it reaches approximately $4.2 million in the last year of the initial term for the
expansion premises. Pursuant to the lease amendment, the landlord has also agreed to provide the Company with a
tenant improvement allowance of approximately $3.2 million for improvements to be made to the expansion premises.
The lease amendment required the Company to pay an additional security deposit of $0.8 million to the landlord for the
expansion premises, which is recorded in restricted cash on the Company’s consolidated balance sheet as of
December 31, 2019.
The lease agreements do not contain residual value guarantees and the components of lease cost for the year
ended December 31, 2019 were as follows (in thousands):
Operating leases:
Lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31, 2019
16,162
(2,834)
13,328
Year Ended
For the years ended December 31, 2018 and 2017 rent expenses under ASC 840, net of sublease income, was
$7.3 million and $6.3 million, respectively.
The Company has not entered into any material short-term leases or financing leases as of December 31, 2019.
F-35
Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows (in
thousands):
Year Ended
December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,247
Lease liabilities arising from obtaining right-of-use assets:
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23,300
The weighted average remaining lease term and weighted average discount rate of the operating leases are as
follows:
Weighted average remaining lease term in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.30
8.2%
Future minimum lease payments under non-cancellable leases as of December 31, 2019 were as follows (in
thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future minimum lease payments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,341
14,764
14,719
12,746
13,121
70,350
140,041
(44,093)
95,948
(1)
Minimum lease payments have not been reduced by minimum sublease rentals of $2.4 million due in the future
under the Company’s non-cancelable 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.
15. Employee Benefit Plans
The Company sponsors various retirement and pension plans. The estimates of liabilities and expenses for these
plans incorporate a number of assumptions, including expected rates of return on plan assets and interest rates used to
discount future benefits.
401(k) Savings 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 Code, so that contributions to the 401(k) Plan by employees or by the Company, and the
investment earnings on contributions, 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, 2019, 2018 and 2017, the Company contributed $1.3 million, $0.8 million and $0.5 million, respectively,
to the 401(k) Plan.
F-36
Switzerland Defined Benefit Plan
The Company maintains a pension plan covering employees of its Swiss subsidiary, Blueprint Medicines
(Switzerland) GmbH (the “Swiss Plan”). The Swiss Plan is a government-mandated retirement fund that provides
employees with a minimum benefit. Employer and employee contributions are made to the Swiss Plan based on various
percentages of salary and wages that vary according to employee age and other factors. The Company’s contributions to
the Swiss Plan for the year ended December 31, 2019 were $0.2 million. The Company’s expected contributions for the
year ended December 31, 2020 are $0.4 million.
As is customary with Swiss pension plans, the assets of the Swiss Plan are invested in a collective fund with
multiple employers. The Company has no investment authority over the assets of the Swiss Plan, which are held and
invested by a Swiss insurance company. The investment strategy of the Swiss Plan is managed by an independent asset
manager with the objective of achieving a consistent long-term return which will provide sufficient funding for future
pension obligations while limiting risk. As of December 31, 2019, the Swiss Plan had an unfunded net pension
obligation of $3.0 million, plan assets of $4.7 million and accumulated benefit obligation of $6.5 million. The expected
rate of return on plan assets is 2.6%. During the year ended December 31, 2019, the Company recorded $0.2 million
expenses related to the Swiss Plan.
16. Commitments
The Company has no other commitments other than the minimum lease payments commitment as disclosed in
Note 14, Leases.
17. Selected Quarterly Financial Data (unaudited)
The following table contains selected quarterly financial information for 2019 and 2018. The Company believes
that the following information reflects all normal recurring adjustments necessary for a fair statement of the information
for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future
period.
March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019
(in thousands, except per share data)
Three Months Ended
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total operating expenses. . . . . . . . . . . . . . . . . . . . .
Total other income . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss per share — basic and diluted . . . . . . . . . $
730 $
5,110 $
90,803
2,666
(87,407) $
(1.98) $
109,024
4,233
(99,681) $
(2.04) $
9,139 $
107,100
3,686
(94,275) $
(1.92) $
51,533
120,911
3,047
(66,331)
(1.35)
March 31, 2018 June 30, 2018
September 30, 2018 December 31, 2018
Three Months Ended
(in thousands, except per share data)
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total operating expenses . . . . . . . . . . . . . . . . . . . .
Total other income . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net loss per share — basic and diluted . . . . . . . . . $
$
954
59,865
2,362
(56,549) $
(1.29) $
41,439
70,906
2,419
(27,048)
(0.62)
$
$
$
$
1,095
76,603
2,785
(72,723) $
(1.66) $
1,033
84,175
2,820
(80,322)
(1.83)
18. Subsequent Events
On January 9, 2020, the FDA granted approval of AYVAKIT (avapritinib) for the treatment of adults with
unresectable or metastatic gastrointestinal stromal tumor harboring a PDGFRA exon 18 mutation, including PDGFRA
D842V mutations, and the Company has commenced the sale of AYVAKIT in the U.S.
F-37
On January 27, 2020, the Company closed a follow-on public offering of 4,710,144 shares of its common stock
at a price to the public of $69.00 per share and received estimated net proceeds of $308.2 million, after deducting
underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company has
also granted the underwriters a 30-day option to the underwriters to purchase up to an additional 706,521 shares of its
common stock at the public offering price, less underwriting discounts and commissions.
F-38
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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
Jeff Albers
Chief Executive Officer,
President and Board Member,
Blueprint Medicines
Alexis Borisy
Chairman and Chief Executive Officer,
EQRx, Inc.
Debbie Durso-Bumpus
Chief People Officer
Kate Haviland
Chief Operating Officer
Mike Landsittel
Chief Financial Officer
Lonnel Coats
Chief Executive Officer,
President and Board Member,
Lexicon Pharmaceuticals, Inc.
George D. Demetri, M.D.
Professor of Medicine at Harvard
Medical School, Director of the
Center for Sarcoma and Bone
Oncology and Physician at the
Dana-Farber Cancer Institute
Tracey L. McCain, Esq.
Executive Vice President,
Chief Legal and Compliance Officer
Christopher K. Murray, Ph.D.
Senior Vice President,
Technical Operations
Christina Rossi
Chief Commercial Officer
Mark Goldberg, M.D.
Associate Professor of Medicine,
Harvard Medical School
Nicholas Lydon, Ph.D.
Founder, Granite Biopharma LLC
Charles A. Rowland, Jr.
Former Chief Executive Officer,
Aurinia Pharmaceuticals Inc.
Lynn Seely, M.D.
Chief Executive Officer, President and
Board Member, Myovant Sciences, Ltd.
Annual Meeting of Stockholders
SEC Form 10-K
Transfer Agent
The 2020 annual meeting of
stockholders will be held on Tuesday,
June 23, 2020, at 3:30 p.m. ET online at
http://www.virtualshareholdermeeting.
com/BPMC2020.
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.
Meidinger Tower, 462 South 4th Street
Louisville, KY 40202
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 development of AYVAKIT™ (avapritinib), pralsetinib, fisogatinib, and BLU-263, including the timing, designs, implementation, enrollment, plans and announcement of results
regarding Blueprint Medicines’ ongoing and planned clinical trials for avapritinib, pralsetinib, fisogatinib and BLU-263; plans and timelines for nominating additional development candidates; plans
and timelines for submitting marketing applications for avapritinib and pralsetinib and, if approved, commercializing avapritinib in additional indications or pralsetinib; the potential benefits of
Blueprint Medicines’ current and future approved drugs or drug candidates in treating patients; expectations regarding Blueprint Medicines’ existing cash, cash equivalents and investments; and
Blueprint Medicines‘ strategy, goals and anticipated milestones, business plans and focus. The words “aim,” “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 impact of the COVID-19 pandemic to Blueprint Medicines’ business, operations, strategy, goals and anticipated milestones; Blueprint Medicines‘
ability and plan in establishing a commercial infrastructure, and successfully launching, marketing and selling its approved drug; Blueprint Medicines’ ability to successfully expand the approved
indications for avapritinib, including its ability to obtain approval for its pending new drug application for avapritinib for the treatment of fourth-line GIST from the U.S. Food and Drug Administration,
or obtain marketing approval for AYVAKIT in additional geographies in the future; the delay of any current or planned clinical trials or the development of Blueprint Medicines‘ drug candidates or
licensed drug candidate; Blueprint Medicines’ advancement of multiple early-stage efforts; Blueprint Medicines’ ability to successfully demonstrate the safety and efficacy of its drug candidates
and gain approval of its drug candidates on a timely basis, if at all; 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; and the success of Blueprint Medicines' current and future collaborations or licensing arrangements. These and other risks and
uncertainties are described in greater detail in the section entitled “Risk Factors” in Blueprint Medicines‘ filings with the Securities and Exchange Commission (SEC), including Blueprint Medicines’
Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 13, 2020, and any 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 29, 2020 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 29, 2020
Blueprint Medicines Global Headquarters
45 Sidney Street
Cambridge, MA 02139
USA
Blueprint Medicines (Switzerland) GmbH
Baarerstrasse 8
6300 Zug
Switzerland
blueprintmedicines.com
NASDAQ: BPMC