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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
 
 
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Fiscal Year Ended
December 31, 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:
001-36065
ACCELERON PHARMA INC.
(Exact name of Registrant as specified in its charter)
Delaware
 
 
27-0072226
(State or other jurisdiction of
incorporation or organization)
 
 
(I.R.S. Employer
Identification No.)
128 Sidney Street
 
 
 
Cambridge,
MA
 
 
02139
(Address of principal executive offices)
 
 
(Zip Code)

(617649-9200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Class:
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
 
XLRN
 
Nasdaq Global 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 ý    No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act. Yes o    No ý
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 the filing requirements for the past 90 days. Yes ý    No o
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 ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
 
Accelerated filer
o
 
 
 
 
Non-accelerated filer
o  
 
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  ý
 
The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold (based on the closing share price as quoted on the Nasdaq Global Market) as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1.8 billion.

As of January 31, 2020, the registrant had 53,337,296 shares of Common Stock, $0.001 par value per share, outstanding.
 



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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement relating to its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. 



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ACCELERON PHARMA INC.
FORM 10-K
INDEX
 
 
Page
 
 
 
 
 
 
 
 



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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the information incorporated herein by reference includes statements that are, or may be deemed, "forward-looking statements." In some cases, these forward-looking statements can be identified by the use of forward-looking terminology. The terms "anticipate", "believe," "contemplate," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "plan," "potential," "predict," "project," "should," "strategy," "target," "will," "would," "vision," or, in each case, the negative or other variations thereon or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
        The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
our ongoing and planned preclinical studies and clinical trials;
clinical trial data and the timing of results of our ongoing clinical trials; 
our plans to develop and commercialize sotatercept in pulmonary hypertension, ACE-083 and our other potential therapeutic candidates;
our and Bristol-Myers Squibb Company's, or BMS's, plans to develop and commercialize REBLOZYL® (luspatercept-aamt) and sotatercept outside of pulmonary hypertension; 
the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnership arrangements; 
the timing of anticipated milestone payments under our collaboration agreements with BMS;
the timing of, and our and/or BMS's ability to, obtain and maintain regulatory approvals for our therapeutic candidates; 
the rate and degree of market acceptance and clinical utility of any approved therapeutic candidate, particularly in specific patient populations; 
our ability to quickly and efficiently identify and develop therapeutic candidates; 
our manufacturing capabilities and strategy; 
our plans for commercialization and marketing;
our intellectual property position; and
our estimates regarding our results of operations, financial condition, liquidity, capital requirements, prospects, growth and strategies.    
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and industry change and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and events in the industry in which we operate may differ materially from the forward-looking statements contained herein.
Any forward-looking statements that we make in this Annual Report on Form 10-K speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events.
You should also read carefully the factors described in the "Risk Factors" section of this Annual Report on Form 10-K to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, press releases, and our website.
Trademarks
We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this report are the property of their respective owners. The trademarks that we own include Acceleron Pharma® and IntelliTrap. Solely for convenience, some of the trademarks, service marks and trade names referred to in this report are listed without the ® and symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.


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PART I
Item 1.    Business
We are a biopharmaceutical company dedicated to the discovery, development and commercialization of therapeutics to treat serious and rare diseases. Our research focuses on key natural regulators of cellular growth and repair, particularly the Transforming Growth Factor-Beta, or TGF-beta, protein superfamily. By combining our discovery and development expertise, including our proprietary knowledge of the TGF-beta superfamily, and our internal protein engineering and manufacturing capabilities, we have generated several innovative therapeutic candidates, all of which encompass novel potential first-in-class mechanisms of action. If successful, these candidates could have the potential to significantly improve clinical outcomes for patients across these areas of high, unmet need.
We have focused and prioritized our research and development activities within three key therapeutic areas: hematology, pulmonary and neuromuscular.
Hematology
In November 2019, the U.S. Food and Drug Administration, or FDA, approved our first commercial product, REBLOZYL® (luspatercept-aamt) for the treatment of anemia in adult patients with beta-thalassemia who require regular red blood cell, or RBC, transfusions. REBLOZYL is partnered with Bristol-Myers Squibb Company, or BMS (which acquired Celgene Corporation in November 2019), and is a first-in-class erythroid maturation agent designed to promote RBC production through a novel mechanism. The approval of REBLOZYL is based on the positive results from the Phase 3 BELIEVE trial evaluating the safety and efficacy of REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions.
In addition to its approved indication, luspatercept-aamt is being developed to treat anemia in patients with myelodysplastic syndromes, or MDS, non-transfusion dependent beta-thalassemia, and myelofibrosis. We and BMS previously announced positive results for the Phase 3 MEDALIST trial evaluating the safety and efficacy of luspatercept-aamt for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. Based on these results, BMS submitted a supplemental Biologics License Application, or sBLA, in the United States for luspatercept-aamt for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. The FDA accepted the sBLA and set a target action date of April 4, 2020. BMS also submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, in the BELIEVE and MEDALIST indications. The MAA has been successfully validated and we expect the EMA to issue a decision in the second half of 2020.
BMS is currently conducting a Phase 2 clinical trial with luspatercept-aamt in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, with preliminary topline results currently expected by the end of 2020, and a Phase 3 clinical trial, the COMMANDS trial, in first-line, lower-risk MDS patients. In myelofibrosis, BMS is conducting a Phase 2 clinical trial in patients with myelofibrosis-associated anemia, and initial results from this trial were presented in December 2019 at the 61st American Society of Hematology (ASH) Annual Meeting and Exposition showing that luspatercept-aamt improved anemia in patients receiving and not receiving RBC transfusions, with more profound effects in patients treated with ruxolitinib, a small molecule JAK inhibitor. Based on these data, we and BMS announced plans to initiate by the end of 2020 the Phase 3 INDEPENDENCE study in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions.
If approved in the United States and Europe, we believe that there is an annual peak sales opportunity for REBLOZYL in excess of $2 billion in lower-risk MDS and beta-thalassemia, and upon successful development and approval in the United States and Europe, an additional $1 billion in myelofibrosis and other future development opportunities. We and BMS are evaluating luspatercept-aamt for the treatment of anemia in potential new indications that could provide additional sales opportunities.
BMS is responsible for paying 100% of the development costs for all clinical trials for luspatercept-aamt. We may receive a maximum of $125.0 million for remaining potential regulatory and commercial milestone payments. We have a co-promotion right in North America and our commercialization costs provided in the commercialization plan and budget approved by the Joint Commercialization Committee, or JCC, are entirely funded by BMS. Activities that we elect to conduct outside of the approved development or commercialization budgets to support REBLOZYL are at our own expense. We are eligible to receive tiered royalty payments from BMS on net sales of REBLOZYL in the low-to-mid 20% range.

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Pulmonary
We are actively developing our lead pulmonary program, sotatercept, for the treatment of patients with pulmonary arterial hypertension, or PAH. Sotatercept is generally partnered with BMS, but we retain the exclusive rights to fund, develop, and lead the global commercialization of sotatercept in pulmonary hypertension, which we refer to as the PH field, and that includes PAH. PAH is a rare and chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in the pulmonary arteries.
In January 2020, we announced that the PULSAR Phase 2 clinical trial of sotatercept for the treatment of patients with PAH met its primary and key secondary endpoints, as well as other secondary endpoints. The 18-month extension period of the PULSAR trial is ongoing. We are also currently enrolling an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH, with preliminary results expected in 2020.
If sotatercept is commercialized to treat PAH and we recognize such revenue, then we will owe BMS a royalty in the low 20% range on global net sales. In certain circumstances, BMS may recognize revenue related to the commercialization of sotatercept in PAH, and in this scenario we will be eligible to receive a royalty from BMS such that the economic position of the parties is equivalent to the scenario in which we recognize such revenue.
Neuromuscular
We are independently developing our wholly-owned neuromuscular candidate, ACE-083. ACE-083 is designed for the treatment of focal muscle disorders. We are currently conducting a Phase 2 clinical trial with ACE-083 in patients with Charcot-Marie-Tooth disease, or CMT, and an extension study for eligible CMT patients who have completed treatment in the Phase 2 clinical trial with ACE-083. We previously announced results from part 1 of this Phase 2 clinical trial showing increases in mean total and contractile muscle volume, and reductions in fat fraction. The results also showed that ACE-083 was generally well tolerated. Enrollment is complete in part 2 of this trial and we expect to announce topline results from part 2 in the first quarter of 2020. In September 2019, we announced that ACE-083 did not achieve functional secondary endpoints in part 2 of a Phase 2 clinical trial in patients with facioscapulohumeral muscular dystrophy, or FSHD, and we are discontinuing development of ACE-083 in FSHD.
Funding
As of December 31, 2019 our operations have been funded primarily by $105.1 million in equity investments from venture investors, $773.8 million from public investors, $154.1 million in equity investments from our collaboration partners and $356.7 million in upfront payments, milestones, and net research and development payments from our collaboration partners.
Our Goals and Objectives in the Year 2020
By building on the milestones achieved in 2019, we intend to advance and expand our pipeline in 2020 while focusing on successfully commercializing REBLOZYL, and we plan to achieve the following goals and objectives:
Hematology
REBLOZYL® (luspatercept-aamt)
Successful US commercial launch in its first indication to treat anemia in adult patients with beta-thalassemia who require regular RBC transfusions
FDA approval of the sBLA in the MDS indication by the target action date of April 4, 2020, and successful US commercial launch of its second indication
EMA approval of the MAA in the beta-thalassemia and MDS indications in the second half of 2020
Topline results for the BEYOND Phase 2 trial by year end
Continue enrollment of COMMANDS Phase 3 trial
Initiate the INDEPENDENCE Phase 3 trial by year end
Potential clinical development expansion into other disease states
Pulmonary
Sotatercept
Present data from the PULSAR Phase 2 clinical trial at the American Thoracic Society’s International Conference in May 2020
Announce preliminary results from the exploratory SPECTRA study by year end
Neuromuscular

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ACE-083
Announce preliminary results for part 2 of the Phase 2 clinical trial of ACE-083 in patients with CMT in the first quarter of 2020
The Acceleron Discovery Platform: Novel Approaches to Potent Biology
Since our founding, we have focused on developing therapeutic candidates that regulate cellular growth and repair. We have targeted a group of approximately 30 secreted proteins, or ligands, that are collectively referred to as the TGF-beta superfamily. These ligands bind to subsets of 12 different receptors on the surface of cells, triggering intra-cellular changes in gene expression that guide cell growth and differentiation. The TGF-beta superfamily ligands and their receptors represent a diverse set of drug targets with the potential to yield potent therapeutics for the growth and repair of diseased cells and tissues.
Applying our proprietary discovery and development platform, including our knowledge of the biology of the TGF-beta superfamily and its receptors, we have generated multiple Fc-fusion protein ligand traps, our novel IntelliTrap platform technology and a robust pipeline of innovative clinical and preclinical therapeutic candidates targeting key mechanisms underlying serious and rare diseases. Additionally, we are conducting a multi-target antibody discovery collaboration with Adimab LLC, or Adimab, a leading antibody discovery company, under which Adimab is generating human antibodies against undisclosed targets that we select. This collaboration could expand our biologics platform and provide us with enhanced access to antibody therapeutic candidates in the future.
We use our integrated platform of research, development and manufacturing technologies to rapidly and cost-effectively create, test and advance our therapeutic candidates. Our leadership in the understanding of TGF-beta biology and protein engineering generates innovative compounds that engage the body's ability to regulate cellular growth and repair.
Our Pipeline
pipeline2020a01.jpg
REBLOZYL® (luspatercept-aamt)
REBLOZYL is a first-in-class erythroid maturation agent designed to promote RBC production through a novel mechanism. In November 2019, the FDA approved REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions based on data from the Phase 3 BELIEVE trial. BMS has submitted an sBLA in the United States for luspatercept-aamt for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions based on the Phase 3 MEDALIST trial, and the FDA accepted the sBLA and set a target action date of April 4, 2020. BMS also submitted an MAA to the EMA based on the BELIEVE and MEDALIST trials. The MAA has been successfully validated and we expect the EMA to issue a decision in the second half of 2020.
In addition to the BELIEVE and MEDALIST indications, luspatercept-aamt is being developed to treat anemia in patients with non-transfusion dependent beta-thalassemia, with myelofibrosis, and as a first-line treatment for patients with lower-risk MDS.

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Beta-thalassemia
The thalassemias comprise a heterogeneous group of disorders arising from defects in the genes that encode the proteins that comprise hemoglobin. Hemoglobin is a four-subunit protein complex formed of two alpha-subunits and two beta-subunits, each with an iron-containing heme group that binds to and carries oxygen molecules within red blood cells. There are two main classifications of thalassemia, alpha-thalassemia and beta-thalassemia, depending on whether the genetic defect lies in the gene encoding the alpha-subunit or the beta-subunit, respectively. Beta-thalassemia is particularly prevalent throughout the Mediterranean region, Middle East, and Southeast Asia, and, due to migration and immigration, is increasingly a global disease. The Thalassaemia International Federation estimates that there are approximately 300,000 patients worldwide with beta-thalassemia, approximately 20,000 of which are in the United States and Europe, who are dependent on frequent blood transfusions. We estimate that there are at least as many beta-thalassemia patients in the same regions who are not transfusion dependent and not included in these estimates. Many of these patients have hemoglobin levels that are approximately half that of normal individuals and experience significant complications of the disease. Beta-thalassemia is treated primarily by RBC transfusions that, over time, cause a toxic accumulation of iron in the body. A central challenge for managing patients with beta-thalassemia is to restore the RBC levels while avoiding iron overload. Iron chelation therapy alone costs between $35,000 and $75,000 per year in the United States and certain countries in Europe and yet does not treat the underlying anemia. The course of the disease depends largely on whether patients are maintained on an adequate transfusion and iron chelation regimen. Poor compliance with transfusion and/or iron chelation is associated with a poor prognosis and shortened survival. However, even with the standard of care, patients are at risk of infection from transfusions as well as toxicities related to iron chelation therapy.
In addition to REBLOZYL, patients with beta-thalassemia are treated with hematopoietic stem cell transplantation, which is used as a potentially curative approach for beta-thalassemia, however this option is limited by the availability of appropriate donors and by risks, including death, associated with the bone marrow transplant procedure. Consequently this treatment is used only in the most severely affected patients. Bluebird bio’s ZYNTEGLO™ (autologous CD34+ cells encoding βA-T87Q-globin gene), a gene-therapy program delivered after single-agent, myeloablative busulfan conditioning, was granted conditional marketing authorization by the European Commission, or EC, for patients with transfusion dependent beta-thalassemia in June 2019. Bluebird bio has disclosed plans to complete the submission of a Biologics License Application to the FDA in the second half of 2020.
BELIEVE
In December 2019, updated results from the BELIEVE trial were presented at the 61st ASH Annual Meeting and Exposition. BELIEVE is a Phase 3, randomized, double blind, placebo-controlled multicenter study comparing luspatercept-aamt + best supportive care (BSC) versus placebo + BSC in adult beta-thalassemia patients who require regular RBC transfusions. The median age of the patients was 30 years in both treatment arms. 336 patients were randomized 2:1 to receive either luspatercept-aamt 1.0 mg/kg + BSC (224 patients) or placebo + BSC (112 patients) every three weeks for up to 48 weeks. Patients in the luspatercept-aamt + BSC arm were able to be titrated up to 1.25 mg/kg of luspatercept-aamt every three weeks. BSC was defined as RBC transfusions and iron chelation therapy to maintain each patient’s baseline hemoglobin level. Crossover to the luspatercept-aamt treatment group was allowed after unblinding and assessment by an independent Data Safety Monitoring committee; patients receiving luspatercept-aamt + BSC will be followed for up to three years. The study was conducted at 65 sites in 15 countries.
As of the clinical cutoff (January 7, 2019), 45.1% (101/224) of luspatercept-aamt patients and 2.7% (3/112) of placebo patients had achieved at least a 33% reduction in RBC transfusion burden over any 24-week period. Among the luspatercept-aamt patients who had a response, 73.3% (74/101) had at least 2 separate responses, with 59.4% (60/101) having 3 or more responses. The median duration of clinical benefit – defined as the time from first response of at least a 33% reduction in RBC transfusion over any 24-week interval to discontinuation due to any cause – for patients who responded to luspatercept-aamt was 76.3 weeks (24-128.1). The most commonly observed adverse events, or AEs, in the safety population (n=332) included in luspatercept-aamt and placebo patients, respectively, were bone pain (20.2% vs. 8.3%), arthralgia (21.1% vs. 14.7%) and dizziness (12.1% vs. 4.6%). These AEs typically occurred early on, and incidence decreased over time.
BEYOND
BMS is also conducting a Phase 2 clinical trial with luspatercept-aamt in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, with preliminary topline results currently expected by the end of 2020.
Myelodysplastic Syndromes (MDS)
MDS is a group of heterogeneous hematologic diseases characterized by abnormal proliferation and differentiation of blood precursor cells, including RBC precursors, in the bone marrow. This leads to peripheral reductions in red blood cells, often accompanied by decreases in white blood cells and platelets, as well as a risk of disease progression to acute myeloid

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leukemia. Although MDS patients may have varying forms of the disease, anemia is present in the vast majority of MDS patients at the time of diagnosis. MDS is primarily a disease of the elderly, with 88% of cases diagnosed in individuals 60 years of age or older. Cancer surveillance databases estimate the annual incidence of MDS in the United States at over 15,000 cases and the overall U.S./EU prevalence to be at least 125,000 patients.
Hematopoietic stem cell transplantation represents the only treatment modality with curative potential, although the relatively high morbidity and mortality of this approach limits its use. Approximately 75% of the MDS patients in the United States and EU are classified as lower risk and 25% are classified as higher risk. High risk patients are typically treated with inhibitors of DNA methyltransferase such as Vidaza® or Dacogen®, or generic versions that are now available in some countries. Many categorized as lower-risk typically receive ESAs as first-line therapy, though ESAs are not approved by the FDA for the treatment of anemia in MDS patients. Therapeutic options following failure on ESAs are limited, and most patients end up receiving RBC transfusions to manage their anemia. Approximately 15% of patients with MDS have a specific chromosomal mutation and are treated with Revlimid®.
The chronic anemia in MDS is primarily due to ineffective erythropoiesis, and a significant number of MDS patients have serum erythropoietin levels substantially above the normal range, indicating that the chronic anemia in these MDS patients is not a consequence of erythropoietin deficiency. The ineffective erythropoiesis of MDS may be caused by excess signaling by members of the TGF-beta superfamily, which inhibits RBC maturation. For this reason, we believe that blocking this excess signaling by luspatercept-aamt may reverse this inhibition. More than half of MDS patients are unresponsive to the administration of recombinant erythropoietin and instead require RBC transfusions, which can increase the risk of infection and iron-overload related toxicities. Treatment-resistant chronic anemia resulting from ineffective erythropoiesis is a major cause of morbidity in MDS patients.
MEDALIST
In December 2019, updated results from the Phase 3 MEDALIST trial with luspatercept-aamt were presented at the 61st ASH Annual Meeting and Exposition. MEDALIST is a Phase 3, randomized, double blind, placebo-controlled, multi-center study evaluating the safety and efficacy of luspatercept-aamt in patients with very low-, low-, or intermediate-risk non-del(5q) MDS. All patients were RBC transfusion dependent and were either refractory or intolerant to prior erythropoiesis-stimulating agent (ESA) therapy, or were ESA naïve with endogenous serum erythropoietin ≥ 200 U/L, and had no prior treatment with disease modifying agents. The median age of the patients enrolled in the trial was 71 years in the luspatercept-aamt treatment group and 72 years in the placebo group. Median transfusion burden in both treatment arms was 5 RBC units/8 weeks. 229 patients were randomized to receive either luspatercept-aamt 1.0 mg/kg (153 patients) or placebo (76 patients) via subcutaneous injection once every 21 days. The study was conducted at 65 sites in 11 countries.
The updated analysis presented at ASH measured the achievement and number of individual periods of RBC-transfusion independence (RBC-TI) of at least 8 weeks throughout the course of the study. Additionally, clinical benefit (RBC-TI) of at least 8 weeks and/or modified hematologic improvement-erythroid (HI-E) was also assessed, along with the total duration of the clinical benefit, which was defined as time from achieving clinical benefit until discontinuation due to loss of benefit, adverse events or other causes.
In the analysis, the median baseline RBC transfusion burden for both the luspatercept-aamt and placebo arms was five units per eight weeks. As of the clinical cutoff (July 1, 2019), 47.7% (73/153) of luspatercept-aamt patients and 15.8% (12/76) of placebo patients achieved at least one episode of RBC-TI lasting at least 8 weeks at any point in the study. Sixty-nine point nine percent (51/73) of patients who responded to luspatercept-aamt experienced multiple episodes of at least 8 weeks of RBC-TI at any point, interceded by occasional transfusions. The median total duration of clinical benefit was 92.3 weeks for luspatercept-aamt responders (n=98) and 26.8 weeks for placebo (n=20), with 26.8% of luspatercept-aamt-treated patients remaining on treatment. No placebo-treated patients remained on treatment. The median treatment duration for all RBC-TI responders was 109.1 weeks for luspatercept-aamt-treated patients and 53.6 weeks for patients on placebo.
AEs occurring more frequently with luspatercept-aamt compared to placebo were fatigue, asthenia and headache. These occurred during cycles 1-4 and were mainly grade 1 or 2, with the incidence decreasing over time. Progression to acute myeloid leukemia was similar between the luspatercept-aamt (2%) and placebo (2.6%) arms.
COMMANDS
BMS is also currently conducting the COMMANDS Phase 3 trial in first-line, lower-risk MDS patients and enrollment is ongoing.

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Myelofibrosis
Myelofibrosis is an acquired disease of the bone marrow that results in replacement of the bone marrow with fibrotic tissue leading to bone marrow failure and inability to make new blood cells, including red blood cells, which leads to anemia. Epidemiological databases suggest that there are approximately 30,000 myelofibrosis patients in the United States and Europe. Approximately 30% of myelofibrosis patients present primarily with anemia when diagnosed and nearly all patients will develop anemia with progression of the disease. There is no approved drug therapy to treat chronic anemia in myelofibrosis.
In December 2019, initial results from the Phase 2 clinical trial in patients with myelofibrosis associated anemia were presented at the 61st ASH Annual Meeting and Exposition. Seventy-six patients were enrolled in the trial in multiple cohorts of patients including two groups with anemia only (hemoglobin level equal to or below 9.5 grams per deciliter (g/dL) in a 12-week period prior to the first dose) and without concomitant ruxolitinib (Cohort 1; n=22) or with concomitant ruxolitinib (Cohort 3A; n=14). Two other groups included transfusion dependent (TD; received 2-4 RBC units per 28 days in the 12 weeks prior to the date of the first dose) patients without concomitant ruxolitinib (Cohort 2; n=21) and with concomitant ruxolitinib (Cohort 3B n=19).
Patients in Cohort 3A or 3B were required to be on a stable dose of ruxolitinib for at least 16 weeks prior to initiating luspatercept-aamt. All patients received luspatercept-aamt at a starting dose of 1 mg/kg subcutaneously in three-week treatment cycles and dose increases were allowed up to a maximum dose level of 1.75 mg/kg.
For anemia-only patients (Cohorts 1 and 3A), the primary endpoint was a hemoglobin (Hb) increase of at least 1.5 g/dL from baseline for at least 12 consecutive weeks at every assessment within the first 24 weeks on the study, in the absence of any RBC transfusions. An additional endpoint was the proportion of patients achieving a mean Hb increase of at least 1.5 g/dL over any consecutive 12-week period in absence of RBC transfusions. As of the clinical data cutoff (August 5, 2019), 14% (3/22) and 21% (3/14) of anemia-only patients met the primary endpoint in Cohorts 1 and 3A, respectively. Additionally, 18% (4/22) of Cohort 1 and 64% (9/14) of Cohort 3A patients achieved a mean Hb increase of at least 1.5 g/dL from baseline over any consecutive 12-week period.
For patients receiving RBC transfusions (Cohorts 2 and 3B), the primary endpoint was RBC transfusion independence (RBC-TI) for at least 12 consecutive weeks within the first 24 weeks of the study. An additional endpoint was the proportion of patients demonstrating at least a 50% reduction in their transfusion burden from baseline (minimum 4 RBC units) over at least any consecutive 12-week period. In Cohorts 2 and 3B, 10% (2/21) and 32% (6/19) of patients achieved the primary endpoint, respectively. Additionally, 38% (8/21) of Cohort 2 and 53% (10/19) of Cohort 3B patients achieved at least a 50% reduction in RBC transfusion burden from baseline (minimum 4 RBC units).
Four percent (3/76) of patients had grade 3 or higher treatment-emergent adverse events, or TEAEs. The most commonly occurring TEAEs of any grade greater than 3% were hypertension (12%), bone pain (9%) and diarrhea (5%). Treatment discontinuations as the result of TEAEs occurred in seven (9%) patients. There were no treatment-related deaths.
As a result of the phase 2 study, we and BMS announced plans to initiate in 2020 the pivotal Phase 3 INDEPENDENCE study in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions.
Sotatercept
Sotatercept is an activin receptor type IIA fusion protein that acts as a ligand trap for members in the TGF-beta protein superfamily involved in the remodeling of a variety of different tissues, including the vasculature and fibrotic tissue. In January 2020, we announced that the PULSAR Phase 2 trial of sotatercept met its primary and key secondary endpoints, and other secondary endpoints, in patients with PAH.
Pulmonary Arterial Hypertension (PAH)
Pulmonary hypertension is a group of diseases characterized by elevated blood pressure in the pulmonary circulation resulting from a variety of causes. PAH is a type of pulmonary hypertension. It is a rare, chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in these vessels. Patients typically present with exercise fatigue and shortness of breath. Progressive obstruction and constriction of the pulmonary vasculature leads to elevated blood pressure in the pulmonary circulation and strain on the right side of the heart. In later stages of disease, right heart failure may develop, and heart failure is the major cause of death in PAH patients. The major classes of drugs used to treat PAH are: the phosphodiesterase 5 inhibitors (PDE5i), the endothelin receptor antagonists (ERAs), the soluble guanylate cyclase stimulators (sGCs) and the prostacyclins. Despite the availability of therapeutic options, the disease progresses rapidly and the five-year survival rate for patients is approximately 57%. All classes of currently approved therapies are designed to promote the dilation of blood vessels, a mechanism referred to as vasodilation. As evident from the

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high mortality rate, therapies that promote vasodilation improve many aspects of the disease, but do not fundamentally modify or halt the progression of the disease. Accordingly, there is significant unmet need for therapies that address more fundamental aspects of the disease.
Heritable forms of PAH are known, and the underlying genetic defects have been identified. In most cases, the underlying mutations map to a gene that encodes the BMP receptor type II (BMPRII) or genes encoding other proteins that participate in the BMPRII signaling pathway. BMPRII is a key receptor for ligands referred to as the BMPs, and these are part of the TGF-beta superfamily. The BMP-BMPRII signaling pathway activates transcription factors called Smad1/5/8 that coordinate changes in the expression of certain genes. A deficiency in BMP-BMPRII signaling, and the attendant activation of Smad1/5/8, is thought to lead to increased proliferation of cell types that line the vessels, including endothelial cells, smooth muscle cells and fibroblasts. This increased proliferation leads to an overgrowth of smooth muscle and fibrotic tissue around the small arterioles, leading to the formation of muscularized vessels and so-called plexiform lesions. The vessels become constricted and obstructed. Plexiform lesions are arterioles that have become almost completely obstructed by an over-proliferation of endothelial cells, smooth muscle cells and fibrotic tissue. Although the association between BMP-BMPRII signaling and PAH was first identified through the study of patients with heritable forms of the disease, it is now understood that BMP-BMPRII signaling is deficient in patients with non-heritable forms of the disease, including idiopathic and associated forms of PAH. For these reasons, it is expected that a therapeutic agent that improves the signaling deficits in the BMP-BMPRII pathway, activating Smad1/5/8, could rectify key defective molecular signaling events causing the disease, with the potential to modify the course of disease.
It has been reported that a group of proteins targeted by sotatercept, the activins, are present at increased levels in PAH patients. Recently, we and others have found that activins can suppress signaling through the BMP-BMPRII pathway, as measured by assessing Smad1/5/8 activation. We further found that sotatercept, by inhibiting activins, can stimulate the BMP-BMPRII signaling pathway in isolated cells. We evaluated sotatercept for its effects on the establishment of PAH in two mouse models of the disease, and we found that sotatercept had a more profound benefit than representatives of any of the classes of standard-of-care therapies. As a result, we believe that sotatercept has the potential to correct the BMP-BMPRII signaling deficit that is fundamental to disease in PAH patients and thereby modify the course of disease. Further, because sotatercept works by a distinct mechanism from the available vasodilator agents, we believe that sotatercept can be used in combination with these other agents.
The worldwide PAH patient population is expanding, with more than 80,000 patients living with PAH in the United States and European Union combined. PAH represents one of the largest specialty pharmaceutical markets with approximately $4.5 billion in sales in the United States in 2018.
PULSAR and SPECTRA
The PULSAR trial is Phase 2, randomized, double-blind, placebo-controlled study designed to evaluate the efficacy and safety of sotatercept in PAH patients. The primary endpoint of the PULSAR trial is the change from baseline in pulmonary vascular resistance, or PVR, over a 24-week treatment period. The key secondary endpoint is change from baseline in six-minute walk distance, or 6MWD. A total of 106 patients were randomized 3:3:4 into three treatment arms with standard-of-care vasodilator therapies in combination with sotatercept or placebo. Following the 6-month double-blind treatment period, participants in the trial were eligible to enroll into the 18-month extension period, which is currently ongoing.
In January 2020, we announced that the PULSAR trial met its primary and key secondary endpoints in patients with PAH. In patients on stable background PAH-specific therapies, sotatercept demonstrated a statistically significant reduction in PVR, the trial’s primary endpoint, at week 24 versus placebo. The PULSAR trial also achieved a statistically significant improvement in the key secondary endpoint of 6MWD, as well as other secondary endpoints, including amino-terminal brain natriuretic propeptide, or NT-proBNP, and World Health Organization functional class. Sotatercept was generally well tolerated in the PULSAR trial and AEs were consistent with previously published data on sotatercept in other diseases. We plan to present a detailed review of the topline results from the PULSAR trial at the American Thoracic Society’s International Conference in May 2020.
We are also currently enrolling an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH, with preliminary results expected in 2020.
ACE-083
Our third clinical stage therapeutic candidate, ACE-083, is designed to promote muscle growth and function in specific, targeted muscles. ACE-083 uses the Myostatin + approach to promote muscle growth, meaning that ACE-083 inhibits myostatin, a well-characterized regulator of muscle size, as well as other factors that suppress muscle growth. Through the inhibition of multiple suppressors of muscle growth, ACE-083 promotes a substantially greater muscle mass increase than selective myostatin antagonists. We are currently conducting a Phase 2 clinical trial with ACE-083 in patients with CMT, and

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an extension study for eligible CMT patients who have completed treatment in the Phase 2 clinical trial with ACE-083. In September 2019, we announced that ACE-083 did not achieve functional secondary endpoints in part 2 of a Phase 2 clinical trial in patients with FSHD and we are discontinuing development of ACE-083 in FSHD.
CMT
CMT is one of the most common inherited neurologic diseases, estimated to affect more than 125,000 people in the United States. The primary clinical manifestations of CMT include muscle weakness in the lower legs and hands. The lower leg muscle weakness can result in foot drop and a high-stepped gait leading to frequent tripping or falls. The disease is typically diagnosed by the presence of a characteristic pattern of muscle weakness, neurologic symptoms, and family history, as well as through genetic testing.
In 2018, we announced preliminary results for part 1 of the Phase 2 clinical trial with ACE-083 in patients with CMT. These preliminary results included data from 18 patients evaluable for magnetic resonance imaging, or MRI, among three different cohorts with patients receiving ACE-083 as a bilateral injection into the tibialis anterior muscle once every three weeks for 12 weeks. The cohorts consisted of 18 patients with tibialis anterior weakness treated bilaterally with 150mg, 200mg or 240mg/muscle (6 patients each). Mean total muscle volume increases (plus or minus standard error mean, or ± SEM) and mean decreases (± SEM), or improvements, in fat fraction percentage relative to baseline were measured by MRI at 3 weeks after the last dose of ACE-083, and were as follows:
Muscle
ACE-083 Dose/Muscle
Number of Patients
Total Muscle Volume Increase (percent change)
(mean ± SEM)
Decrease in Fat Fraction, % (absolute change)
(mean ± SEM)
Tibialis Anterior
150mg bilateral
6
12.6 (2.9)
-1.7 (1.2)
Tibialis Anterior
200mg bilateral
6
13.3 (1.5)
-3.5 (1.0)
Tibialis Anterior
240mg bilateral
6
14.2 (3.2)
-3.3 (1.2)
ACE-083 was well tolerated in part 1 of the CMT Phase 2 clinical trial and no study-drug related serious adverse events were reported. The most common adverse events were injection site reactions, muscle spasms and myalgia and were grades 1-2. We expect to announce preliminary results from the randomized, double blind, placebo-controlled part 2 of the CMT Phase 2 clinical trial in the first quarter of this year.
Preclinical Programs
In addition to our clinical development activities, we are expanding our research capabilities in order to increase the rate at which our highly productive research group can identify and advance new, internally discovered, therapeutic candidates for clinical development. Our discovery efforts are primarily focused on identifying new protein therapeutic candidates from our fusion protein platform, which includes the IntelliTrap™ platform, and identifying novel antibodies.
Our Strategic Partnerships
Collaborations with corporate partners have provided us with significant funding and access to our partners' scientific, development, regulatory and commercial capabilities. We have received more than $510.9 million from our collaborations with BMS and our prior collaborations with Alkermes plc (Alkermes) and Shire AG (Shire).
BMS
On February 20, 2008 we entered into an agreement with Celgene, which was acquired by BMS in 2019 and which we now refer to as BMS, relating to sotatercept, which we refer to as the Original Sotatercept Agreement. We amended the Original Sotatercept Agreement on August 2, 2011, which we refer to as the Amended Sotatercept Agreement. We further amended and restated the Amended Sotatercept Agreement in its entirety on September 18, 2017, and refer to the amended and restated agreement as the Restated Sotatercept Agreement. On August 2, 2011 we entered into a second agreement with BMS for REBLOZYL, which we refer to as the REBLOZYL Agreement.
Restated Sotatercept Agreement.   The Restated Sotatercept Agreement provides BMS with an exclusive license to sotatercept outside of the PH field, and provides us with the worldwide exclusive rights to develop and commercialize sotatercept in the PH field. We also granted BMS an option to license discovery stage compounds against three specified targets. BMS paid $45.0 million and bought $5.0 million of equity upon execution of the Original Sotatercept Agreement and, as of December 31, 2019, we have received $44.7 million in research and development funding and milestone payments for the sotatercept program.

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In connection with the Restated Sotatercept Agreement, BMS agreed not to develop or commercialize in the PH field any compound developed under the Restated Sotatercept Agreement or the REBLOZYL Agreement, and we agreed not to develop or commercialize any compound developed under the Restated Sotatercept Agreement or the REBLOZYL Agreement in any field outside of the PH field. We have the right to license, transfer or sell our rights to develop and commercialize sotatercept in the PH field, subject to BMS’s right of first negotiation.
We are responsible for 100% of the costs related to our development and commercialization of sotatercept in the PH field. If sotatercept is commercialized to treat PAH and we recognize such revenue, then we will owe BMS a royalty in the low 20% range on global net sales. In certain circumstances, BMS may recognize revenue related to the commercialization of sotatercept in PAH, and in this scenario we will be eligible to receive a royalty from BMS such that the economic position of the parties is equivalent to the scenario in which we recognize such revenue. With respect to the development and commercialization of sotatercept outside of the PH field or the development and commercialization of any other compound under the Restated Sotatercept Agreement, the terms of the Amended Sotatercept Agreement remained unchanged.
Since January 1, 2013, BMS has been responsible for paying 100% of worldwide development costs for the sotatercept program outside of the PH field and BMS will be responsible for all commercialization costs worldwide, as approved in budgets agreed to between us and BMS. We will be eligible to receive tiered royalty payments in the low-to-mid 20% range on net sales of sotatercept outside of the PH field. We are obligated to co-promote sotatercept outside of the PH field and future products in all fields, in each case if approved, in North America, and BMS will pay all costs related thereto pursuant to the commercialization plan and budget. Outside the PH field, BMS will be responsible for any sotatercept Phase 3 clinical trials, as well as any additional Phase 2 clinical trials, and is responsible for manufacturing or overseeing the manufacture of Phase 3 and commercial supplies.
Pursuant to the Restated Sotatercept Agreement, BMS has provided us with certain quantities of BMS’s existing clinical supply of sotatercept for development in the PH field at no cost to us. For clinical supply of sotatercept in excess of that which is agreed to under the Restated Sotatercept Agreement, BMS had the option to provide us with such clinical supply of sotatercept, but has declined this option, and we are responsible for manufacturing future clinical supply of sotatercept in the PH field. BMS may elect, however, to provide us with commercial supply of sotatercept at a negotiated price or provide a tech transfer to us to enable us to manufacture on our own behalf. The conduct of the collaboration is managed by a Joint Development Committee and Joint Commercialization Committee. In the event of a deadlock of a committee, we shall determine the resolution of issues specifically related to the PH field (other than pricing which shall be determined by consensus), and BMS shall determine the resolution of all other issues. The Joint Commercialization Committee will oversee commercialization of sotatercept and sotatercept pricing will be determined by mutual agreement of us and BMS in the Joint Commercialization Committee.
The Restated Sotatercept Agreement will expire on a country-by-country basis on the latest to occur of the following: (1) the expiration of the royalty term with respect to all license products outside the PH field in such country, (2) the expiration of the royalty term with respect to all sotatercept licensed products in the PH field in such country, and (3) the exercise or forfeiture by BMS of its option with regard to each option compound. In the PH field, the royalty term for each licensed product in each country is the period commencing with first commercial sale of the applicable licensed product in the applicable country and ending on the latest of expiration of specified patent coverage or a specified period of years. Outside the PH field, the royalty term for each licensed product in each country outside North America is the period commencing with first commercial sale of the applicable licensed product in the applicable country and ending on the latest of expiration of specified patent coverage or a specified period of years, and the royalty term for each licensed product in North America is the period commencing with the first commercial sale in North America and ending, on a licensed product and country-by-country basis, on the date which commercialization of such licensed product has ceased. The term for each option compound runs for a specified period of years unless BMS exercises its option, in which case the compound becomes a licensed product, or forfeits its option by failing to make certain payments following the achievement of certain milestones in early clinical development of the option compound.
The Restated Sotatercept Agreement is terminable by either party upon a breach that is uncured and continuing or by BMS for convenience on a country-by-country or product-by-product basis, or in its entirety. BMS may also terminate the Restated Sotatercept Agreement, in its entirety or on a product-by-product basis, for failure of a product to meet a development or clinical trial endpoint. Termination for cause by us or termination by BMS for convenience or failure to meet an endpoint will have the effect of terminating the applicable license to BMS and the rights granted to us with respect to the development of sotatercept in the PH field shall become irrevocable. Termination for cause by either party shall result in reducing the remaining royalties due to the breaching party by a certain percentage. Upon termination by BMS for convenience or for failure to meet an endpoint, we and BMS will enter into a termination agreement pursuant to which, among other things, BMS will continue to be eligible to receive a royalty in the low 20% range on global net sales of sotatercept in the PH field.

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We are eligible to receive future development, regulatory and commercial milestones of up to $360.0 million for the sotatercept program outside of the PH field and up to an additional $348.0 million for each of the three discovery stage programs. None of the three discovery stage programs has advanced to the stage to achieve payment of a milestone, nor do we expect any such milestone payments in the near future. We were not required to make any upfront payments to BMS upon execution of the Restated Sotatercept Agreement, and we will not be required to make any milestone payments to BMS in connection with our development and commercialization of sotatercept in the PH field.
REBLOZYL Agreement.    The REBLOZYL Agreement provides BMS with an exclusive license to REBLOZYL in all indications and we and BMS are collaborating in the development and commercialization of REBLOZYL. We also granted BMS an option to license products for which we file an investigational new drug application for the treatment of anemia. BMS paid $25.0 million to us upon execution of the REBLOZYL Agreement in August 2011 and, as of December 31, 2019, we have received $181.9 million in research and development funding and milestone payments for the REBLOZYL program.
 Under the REBLOZYL Agreement, the conduct of the collaboration is managed by a Joint Development Committee and Joint Commercialization Committee. Other than with respect to certain matters related to our conduct of Phase 2 trials, in the event of a deadlock of a committee, the resolution of the relevant issue is determined by BMS. Since January 1, 2013, BMS has been responsible for paying 100% of worldwide development costs for the REBLOZYL program and BMS will be responsible for all commercialization costs worldwide, as approved in the budgets agreed to between us and BMS. We are obligated to co-promote REBLOZYL and future products, in each case if approved, in North America, and BMS will pay all costs related thereto. Activities that we elect to conduct outside of the approved budgets to support REBLOZYL are at our own expense. We are eligible to receive tiered royalty payments in the low-to-mid 20% range on net sales of REBLOZYL.
The REBLOZYL Agreement is terminable by either party upon a breach that is uncured and continuing or by BMS for convenience on a country-by-country or product-by-product basis, or in its entirety. BMS may also terminate the REBLOZYL Agreement in its entirety or on a product-by-product basis for failure of a product to meet a development or clinical trial endpoint. Termination for cause by us or termination by BMS for convenience or failure to meet an endpoint will have the effect of terminating the applicable license, while termination for cause by BMS will have the effect of reducing remaining royalties by a certain percentage.
Under the REBLOZYL Agreement, we retained responsibility for research, development through the end of Phase 1 and the two ongoing Phase 2 clinical trials in MDS and beta-thalassemia, as well as manufacturing the clinical supplies for these studies. BMS may supply additional clinical supplies for our ongoing Phase 2 clinical trials in MDS and beta-thalassemia if needed. BMS will conduct any subsequent Phase 2 and Phase 3 clinical trials. We were responsible for manufacturing REBLOZYL for all Phase 1 and Phase 2 clinical trials, and BMS has responsibility for the manufacture of REBLOZYL for any additional Phase 2 and Phase 3 clinical trials and commercial supplies. We are eligible to receive future regulatory and commercial milestones of up to $125.0 million for the REBLOZYL program.
Competition
The development and commercialization of new drugs is highly competitive. We and our collaborators will face competition with respect to all therapeutic candidates we may develop or commercialize in the future from pharmaceutical and biotechnology companies worldwide. Many of the entities developing and marketing potentially competing products have significantly greater financial resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop.
If our clinical stage therapeutic candidates are approved, they will compete with currently marketed drugs and therapies used for treatment of the following indications, and potentially with drug candidates currently in development for the same indications:
Beta-thalassemia
Now that REBLOZYL is approved for the treatment of patients with beta-thalassemia, it may compete with:
RBC transfusions, which are used to treat anemia in patients with beta-thalassemia, and iron chelation therapy, such as Novartis's oral iron chelating agents Exjade® and JadenuTM, which are used to treat iron overload in patients with beta-thalassemia.
Fetal hemoglobin stimulating agents, such as hydroxyurea, which are primarily used to treat patients with anemia from sickle cell disease, and are sometimes used to treat patients with beta-thalassemia.

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Hematopoietic stem cell transplant treatment, which is given to a small percentage of patients with beta-thalassemia, since it requires a sufficiently well-matched source of donor cells. Certain academic centers around the world are seeking to develop improvements to this approach.
Bluebird bio’s gene therapy program, ZYNTEGLO™ (autologous CD34+ cells encoding βA-T87Q-globin gene), a gene-therapy program delivered after single-agent, myeloablative busulfan conditioning, which was granted conditional marketing authorization by the European Commission for patients with transfusion dependent beta-thalassemia in June 2019. Bluebird bio has disclosed plans to complete the submission of a Biologics License Application to the FDA in the second half of 2020.
Other therapies in development, including gene therapy and genome editing, that are being developed by several different groups, including Orchard Therapeutics, Sangamo BioSciences Inc. in collaboration with Sanofi, and CRISPR Therapeutics in collaboration with Vertex. Agios Pharmaceuticals is also developing mitapivat (AG-348), a small molecule allosteric activator of wild-type and a variety of mutated pyruvate kinase-R (PKR) enzymes, for the treatment of anemia in patients with non-transfusion dependent thalassemia.
MDS
If luspatercept-aamt is approved for the treatment of patients with MDS, it would compete with the following:
Recombinant erythropoietin and other erythropoiesis stimulating agents. Although these agents are not approved to treat anemia in MDS in the United States, current practice guidelines include the use of erythropoiesis stimulating agents and granulocyte colony stimulating factor agents (G-CSF) to treat patients with MDS. Eprex® from Janssen Pharmaceuticals was recently approved in Europe to treat symptomatic anemia in certain patients with lower risk MDS.
Red blood cell transfusions, which are used to treat anemia in patients with MDS, and iron chelation therapy, such as Novartis's oral iron chelating agents Exjade® and JadenuTM, which are used to treat iron overload in patients with MDS.
Immunomodulators, including BMS's approved product, Revlimid® (lenalidomide), for the treatment of anemia of certain MDS patients.
The hypomethylating agent azacitidine, which is approved by the FDA to treat certain French-American-British MDS subtypes, which includes some lower risk MDS patients.
Roxadustat (FG-4592), a hypoxia-inducible factor prolyl hydroxylase inhibitor that Fibrogen is studying in a Phase 3 study in lower risk MDS patients with anemia and low transfusion burden.
Other therapies in development, including: an oral form of the hypomethylating agent azacitidine, known as CC-486, being developed by BMS to treat patients with transfusion dependent anemia and thrombocytopenia due to lower risk MDS, which is currently in Phase 3 clinical trials in the United States and Europe; an anti-cancer therapy being developed by Onconova to treat patients with high risk MDS; a telemorase inhibitor, imetelstat, being studied by Geron in a Phase 2/3 study in lower risk MDS patients; and a CD95 ligand inhibitor, Asunercept, formerly APG101, being studied by Apogenix, completed a Phase 1 study in transfusion dependent, lower risk MDS patients.
Myelofibrosis
If luspatercept-aamt is approved for the treatment of patients with myelofibrosis, it would compete with:
Red blood cell transfusions, which are used to treat anemia in patients with myelofibrosis, and iron chelation therapy, such as Novartis's oral iron chelating agents Exjade® and JadenuTM, which are used to treat iron overload in patients with myelofibrosis.
Recombinant erythropoietin, other erythropoiesis stimulating agents, androgen therapy, and immunomodulatory drugs. Although these agents are not approved to treat anemia in myelofibrosis in the United States, current practice guidelines include the use of these agents to treat anemia in patients with myelofibrosis.
A telomerase inhibitor, imetelstat, being studied by Geron in a Phase 2 study to treat intermediate-2 or high-risk in patients with myelofibrosis.
Momelotinib, a JAK1, JAK2, ACVR1 inhibitor acquired by Sierra Oncology from Gilead Inc., which is in development for treatment of myelofibrosis. Momelotinib has been investigated in two completed Phase 3 trials for

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the treatment of myelofibrosis and is currently moving forward in a new Phase 3 trial in patients with myelofibrosis who have been treated previously with a JAK inhibitor.
Constellation Pharmaceuticals's BET inhibitor, CPI-0610, which is in Phase 2 clinical development to treat patients with myelofibrosis in a first-line setting, second-line JAK refractory, and second-line JAK combination. Constellation has announced plans to conduct a Phase 3 trial in treatment-naïve or post-polycythemia and post-essential thrombocythemia myelofibrosis patients.
Pulmonary Arterial Hypertension
We recently announced positive topline results from the PULSAR Phase 2 clinical trial of sotatercept for the treatment of patients with PAH, and enrollment is ongoing in an exploratory study called SPECTRA to provide us with further understanding of sotatercept's impact on PAH. PAH is a rare and chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in the pulmonary arteries.
If sotatercept is approved for the treatment of patients with PAH, it may compete with four distinct classes of vasodilator therapies:
Phosphodiesterase type 5 (PDE5) inhibitors Adcira® (tadalafil, Eli Lilly) and Revatio® (sildenafil, Pfizer), which are orally available small molecules. PDE5 inhibitors prevent degradation of intracellular cGMP released in response to nitric oxide (NO), resulting in relaxation of pulmonary vessels.

Soluble guanylate cylase (sGC) stimulator Adempas® (riociguat, Bayer), which targets different molecules in the same biological pathway as PDE5 inhibitors and is also an oral small molecule.

Endothelin receptor antagonists (ERA) Letairis® (ambrisentan, Gilead), Opsumit® (macitentan, Actelion/J&J), and Tracleer® (bosentan, Actelion/J&J)), which are all orally available small molecules. ERAs block activity of endothelin-1, which causes constriction of pulmonary vessels.
Prostacyclin analogues relax pulmonary vessels, which prevent platelet aggregation, and inhibit smooth muscle proliferation. They are the most potent therapies for treating PAH and are available orally (Orenitram® (trepostinil, United Therapeutics), Uptravi® (selexipag, Actelion/J&J)); for inhalation (Tyvaso® (trepostinil, United Therapeutics), Ventavis® (iloprost, Actelion/J&J)); and for infusion (Remodulin® (trepostinil, United Therapeutics), Veletri® (epoprostenol, Actelion/J&J)).
In addition, agents with novel mechanisms of action are being investigated for treatment of patients with PAH:
Reata Pharmaceuticals and Complexa Inc. are developing Nrf2 modulators bardoxolone and CXA-10, respectively. Reata is evaluating bardoxolone in a phase 3 trial in patients with PAH associated with connective tissue disease. Complexa is evaluating CXA-10 in a phase 2 trial in patients with PAH.
PhaseBio is evaluating a VPAC peptide PB1046 in a phase 2 trial in patients with PAH.
Two companies are evaluating agents that are intended to enhance BMPR2 signaling in patients with PAH. Vivus Inc. is evaluating tacrolimus in a phase 2 trial in patients with PAH. Morphogen IX Ltd. is in the process of preclinical development of a protein-engineered variant of BMP9, MGX292, for eventual clinical evaluation in patients with PAH.
The key competitive factors affecting the success of any approved product will be its efficacy, safety profile, price, method of administration and level of promotional activity.
Therapies for Treating Muscle Loss
We are currently studying ACE-083 in a Phase 2 clinical trial for the treatment of patients with CMT. A potential competitor of ACE-083 in CMT is PXT3003, which is an investigational pleotherapy being developed by Pharnext. Pharnext has reported that although PXT3003 met the primary endpoint in a Phase 3 trial in patients with CMT1A, based on feedback from the FDA, Pharnext is planning a new Phase 3 trial in patients with CMT1A.
We are also aware of approaches to treat other muscle loss diseases that are in clinical trials. Regeneron is studying two drugs in combination, REGN2477 (garetosmab, an activin A antibody, combined with trevogrumab, a myostatin antibody), in a Phase 1 clinical trial to treat muscle wasting diseases. Roche is studying RO7239361, a myostatin fusion protein, in a Phase 1/2 clinical trial of Duchenne muscular dystrophy (DMD). Other approaches to myostatin inhibition, including monoclonal antibodies (such as SRK-015 in Phase 1/2 clinical trials by Scholar Rock), and ligand traps (such as RG6206 in Phase 2/3

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clinical trial by Roche and ALG-801 in Phase 1 by Alivegen in partnership with Biogen), are being studied to treat a number of neuromuscular diseases, including muscular dystrophies, disuse muscle atrophy, cancer-related cachexia, and sarcopenia. Nationwide Children's Hospital, in collaboration with The Myositis Association, Parent Project Muscular Dystrophy and Milo Biotechnology, have completed a Phase 1 clinical trial of a gene therapy delivery of follistatin (FS344) to muscle in patients with Becker muscular dystrophy (BMD) and sporadic inclusion body myositis (sIBM) and have a second clinical trial in Duchenne muscular dystrophy underway. There are also other programs in early stage development that focus on gene editing and next generation antisense that could compete with our therapies for treating muscle loss.
Commercialization
We retain co-promotion rights in North America with our collaboration partner, BMS, for both REBLOZYL and, outside of the PH field, sotatercept, and under the terms of our agreements with BMS our commercialization costs will be entirely funded by BMS as approved in the budget agreed to between us and BMS. We also currently retain worldwide commercialization rights for sotatercept in the PH field and ACE-083. We intend to build hematology, neuromuscular and pulmonary disorder focused, specialty sales forces in North America, and have already established a hematology specialty sales force in the United States to support the launch of REBLOZYL. In the future, we may expand to other markets to effectively support the commercialization of these and future products. We believe that a specialty sales force will be sufficient to target key prescribing physicians in these areas. Now with the launch of REBLOZYL in its first indication, we have limited sales and marketing capabilities and experience through our co-promote with BMS, but we will need to establish additional required capabilities within an appropriate time frame ahead of other product approvals and commercialization to support other products. If we are not able to establish sales and marketing capabilities or are not successful in commercializing our future products, either on our own or through collaborations, any future product revenue will be materially adversely affected.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our therapeutic candidates, novel biological discoveries, screening and drug development technology, to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position. Additionally, we expect to benefit from a variety of statutory frameworks in the United States, Europe and other countries that relate to the regulation of biosimilar molecules and orphan drug status. These statutory frameworks provide periods of non-patent-based exclusivity for qualifying molecules. See "Government Regulation".
Our patenting strategy is focused on our therapeutic candidates. We seek composition-of-matter and method-of-treatment patents for each such protein in key therapeutic areas. We also seek patent protection with respect to companion diagnostic methods and compositions and treatments for targeted patient populations. We have sought patent protection alone or jointly with our collaborators, as dictated by our collaboration agreements.
Our patent estate, on a worldwide basis, includes approximately 788 issued patents and approximately 637 pending patent applications, with pending and issued claims relating to all of our current advanced clinical stage therapeutic candidates, sotatercept and ACE-083, and our approved product, REBLOZYL. These figures include in-licensed patents and patent applications to which we hold exclusive commercial rights.
Individual patents extend for varying periods of time depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued from applications filed in the United States are effective for twenty years from the earliest non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period, however, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also twenty years from the earliest international filing date. Our issued patents and pending applications with respect to our clinical stage therapeutic candidates will expire on dates ranging from 2026 to 2037, exclusive of possible patent term extensions, However, the actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of extensions of patent term, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
National and international patent laws concerning therapeutic candidates remain highly unsettled. No consistent policy regarding the patent-eligibility or the breadth of claims allowed in such patents has emerged to date in the United States, Europe or other countries. Changes in either the patent laws or in interpretations of patent laws in the United States and other

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countries can diminish our ability to protect our inventions and enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that may be granted in our patents or in third-party patents. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Our ability to maintain and solidify our proprietary position for our drugs and technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of the patent applications that we may file or license from third parties will result in the issuance of any patents. The issued patents that we own or may receive in the future, may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not provide us with sufficient protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop and commercialize similar drugs or duplicate our technology, business model or strategy without infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our therapeutic candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such patent. The patent positions for our most advanced programs are summarized below:
REBLOZYL Patent Coverage
We hold two issued patents covering the REBLOZYL composition of matter in the United States, one issued patent in Europe (registered in most countries of the European Patent Convention) and additional patents issued or pending in many other major jurisdictions worldwide, including Europe, Australia, Canada, Japan, China, South Korea, Brazil, Mexico, Russia and India. The expected expiration dates for these composition of matter patents are 2028 and 2029, exclusive of possible patent term extensions.
We hold two issued patents covering the treatment of anemia by administration of REBLOZYL in the United States and similar patents issued or pending in other major jurisdictions worldwide, including Europe, Australia, Canada, Japan, China, South Korea, Brazil, Mexico, Russia and India. The expected expiration date for these method of treatment patents is 2029, exclusive of possible patent term extensions.
We also hold patent applications directed to a variety of other uses for REBLOZYL. The expected expiration date for these method of treatment patents ranges from 2029 to 2037 exclusive of possible patent term extensions.
Sotatercept Patent Coverage
We hold two issued patents covering the sotatercept composition of matter in the United States, one issued patent in Europe (registered in most countries of the European Patent Convention) and additional patents issued or pending in many other major jurisdictions worldwide, including Australia, Canada, Japan, China, South Korea, Brazil, Mexico, Russia, Israel and India. The expected expiration date for these composition of matter patents is 2026, exclusive of possible patent term extensions.
We hold one pending patent application covering the treatment of PAH by administration of sotatercept in the United States and similar pending applications in other major jurisdictions worldwide, including Europe, Australia, Canada, Japan, South Korea, Brazil, Mexico and Russia. If issued, the expected expiration date for these method of treatment patents is 2037, exclusive of possible patent term extensions,
We also hold patents and patent applications directed to a variety of other uses for sotatercept, including the treatment of anemia. The expected expiration date for these method of treatment patents ranges from 2026 to 2029 exclusive of possible patent term extensions.
ACE-083 Patent Coverage
We hold two issued patents covering the ACE-083 composition of matter in the United States, which are expected to expire in 2029 and 2035, respectively, exclusive of possible patent term extensions. We hold additional pending patent applications covering the ACE-083 composition of matter in many other major jurisdictions worldwide, including Europe, Australia, Canada, Japan, China, South Korea, Brazil, Mexico, Russia and India. The expected expiration date for these patent applications, should they issue as patents, is 2035, exclusive of possible patent term extensions.
We also hold patent applications directed to a variety of uses for ACE-083, including the treatment of CMT. The expected expiration date for these method of treatment patent applications, should they issue as patents, is 2035, exclusive of possible patent term extensions.
Trade Secrets
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, using confidentiality

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agreements with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
In-Licenses
Salk
In August 2010, we entered into two amended and restated license agreements with the Salk Institute for Biological Studies, or Salk, providing rights under U.S. patent filings solely owned by Salk. The agreements for the licensed patent rights relate to the first cloning of the type II activin receptors, human ActRIIA and frog ActRIIB, respectively, and include claims to vertebrate homolog nucleic acids and proteins with respect to each of the foregoing. These patent rights expired between the years 2016 and 2017. One of these agreements relates to ActRIIA and sotatercept; the other agreement relates to ActRIIB, REBLOZYL and the discontinued program ACE-031, which we refer to as the ActRIIB Agreement. The licenses granted are exclusive as to the therapeutic products that are covered by the patents and non-exclusive as to diagnostic products and other products that are developed using the Salk patent rights. If we sublicense the Salk patent rights, we will owe Salk a percentage of sublicensing revenue, excluding payments based on sales. Under the agreements, Salk retained rights, on behalf of itself and other non-profit academic institutions, to practice under the licensed rights for non-profit purposes. We agreed to pay Salk specified development milestone payments totaling up to $2.0 million for sotatercept and $0.7 million for REBLOZYL. In addition, we are required to pay Salk royalties in the low single-digits on worldwide net product sales by us or our sublicensees of products claimed in the licensed patents, or derived from use of the licensed patent rights, with royalty obligations continuing at a reduced rate for a period of time after patent expiration. The agreements terminate upon the expiration of royalty obligations. We may terminate either agreement at any time by giving Salk advance written notice. Either agreement may also be terminated by Salk in the event of a material breach by us or in the event we become subject to bankruptcy or similar circumstances.
In October 2012, Salk filed a lawsuit against us alleging that we breached the ActRIIB Agreement. In July 2014, we settled the Salk lawsuit and entered into an amendment to the ActRIIB Agreement with Salk. Pursuant to the settlement, we made a one-time total payment of $5 million, inclusive of interest, to Salk and we agreed to pay Salk 6% of future development milestone payments received under the agreement with BMS relating to REBLOZYL. Finally, we and Salk have further agreed that the royalty percentage on net sales of REBLOZYL will remain at 1% as provided in the ActRIIB Agreement with Salk, and that such royalty will be payable until June 2022.
Fulcrum
In December 2019, we entered into a license and collaboration agreement with Fulcrum Therapeutics, or Fulcrum, to identify small molecules designed to modulate specific pathways associated with a targeted indication within the pulmonary disease space. We paid an upfront research fee of $10.0 million upon execution of the agreement. We also agreed to pay specified research, development and commercial milestone payments of up to $295.0 million for a first product commercialized and up to a maximum of $143.5 million in additional milestone payments for all subsequent products commercialized. Fulcrum will additionally receive tiered royalty payments in the mid-single-digit to low double-digit range on net sales, as well as reimbursement for relevant R&D costs.

The agreement will continue on a target-by-target and country-by-country basis until the expiration of the last to expire royalty obligation, unless earlier terminated pursuant to the agreement. The agreement is terminable by either party upon a breach that is uncured or insolvency of the other party and continuing, or by us for convenience on a country-by-country or collaboration molecule-by-collaboration molecule basis.
Government Regulation
The preclinical studies and clinical testing, manufacture, labeling, storage, record keeping, advertising, promotion, export, marketing and sales, among other things, of our therapeutic candidates and future products, are subject to extensive regulation by governmental authorities in the United States and other countries. In the United States, pharmaceutical products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of biologics, the Public Health Service Act. REBLOZYL is, and we expect sotatercept and ACE-083 to be, regulated by the FDA as biologics and reviewed by the Center for Drug Evaluation and Research (CDER) as proteins intended for therapeutic use. Therapeutic candidates require the submission of a Biologics License Application, or BLA, and approval by the FDA prior to

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being marketed in the U.S. Manufacturers of therapeutic candidates may also be subject to state regulation. Failure to comply with FDA requirements may subject us or our partners, contract manufacturers, and suppliers to administrative or judicial sanctions, including FDA refusal to approve applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, fines and/or criminal prosecution.
As part of the Patient Protection and Affordable Care Act of 2010, under the subtitle of Biologics Price Competition and Innovation Act of 2009, or the BPCIA, a statutory pathway has been created for licensure, or approval, of biological products that are biosimilar to, and possibly interchangeable with, earlier biological products licensed under the Public Health Service Act. Under the BPCIA, innovator manufacturers of original reference biological products are granted 12 years of exclusivity before biosimilars can be approved for marketing in the United States. The objectives of the BPCIA are conceptually similar to those of the Drug Price Competition and Patent Term Restoration Act of 1984 (the "Hatch-Waxman Act"), which established abbreviated pathways for the approval of drug products. The implementation of an abbreviated approval pathway for biological products is under the direction of the FDA. The approval of a biologic product biosimilar to one of our products could have a material adverse impact on our business as it may be significantly less costly to bring to market and may be priced significantly lower than our products.
The steps required before a biologic may be approved for marketing of an indication in the United States generally include:
completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLPs, and other applicable regulations;
submission to the FDA of an Investigational New Drug application, or IND, which must become effective before human clinical trials may commence;
completion of adequate and well-controlled human clinical trials in accordance with Good Clinical Practices, or GCPs, to establish the safety and efficacy of the biological product for its intended use;
submission to the FDA of a BLA;
satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess compliance with applicable current Good Manufacturing Practice requirements, or cGMPs; and
FDA review of the BLA and issuance of a biologics license which is the approval necessary to market a therapeutic candidate.
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation as well as animal studies to assess the potential safety and efficacy of the biologic candidate. Preclinical studies must be conducted in compliance with FDA regulations regarding GLPs. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND. Some preclinical testing may continue even after the IND is submitted. The IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase or phases of the clinical trial lends themselves to an efficacy determination. The IND will automatically become effective 30 days after receipt by the FDA, unless the FDA within the 30-day time period places the IND on clinical hold because of its concerns about the drug candidate or the conduct of the trial described in the clinical protocol. The IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.
All clinical trials must be conducted under the supervision of one or more qualified principal investigators in accordance with GCPs and under protocols detailing the objectives of the applicable phase of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must timely report to the FDA serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator's brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug. An institutional review board, or IRB, at each institution participating in the clinical trial must review and approve the protocol before a clinical trial commences at that institution, approve the information regarding the trial and the consent form that must be provided to each research subject or the subject's legal representative, and monitor the study until completed.
Clinical trials are typically conducted in three sequential phases, but the phases may overlap and different trials may be initiated with the same drug candidate within the same phase of development in similar or differing patient populations. Phase 1 trials may be conducted in a limited number of patients, but are usually conducted in healthy volunteer subjects. The drug

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candidate is initially tested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmacodynamics and pharmacokinetics.
Phase 2 trials usually involve a larger, but still limited, patient population to evaluate preliminarily the efficacy of the drug candidate for specific, targeted indications to determine dosage tolerance and optimal dosage and to identify possible short-term adverse effects and safety risks.
Phase 3 trials further evaluate clinical efficacy of a specific endpoint and test further for safety within an expanded patient population at geographically dispersed clinical trial sites. Phase 1, Phase 2, or Phase 3 testing might not be completed successfully within any specific time period, if at all, with respect to any of our therapeutic candidates. Results from one trial are not necessarily predictive of results from later trials. Furthermore, the FDA or the sponsor may suspend clinical trials at any time on various grounds, including a finding that 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 such trial is not being conducted in accordance with the IRB's requirements or if the drug candidate has been associated with unexpected serious harm to patients.
The results of the preclinical studies and clinical trials, together with other detailed information, including information on the manufacture and composition of the product, are submitted to the FDA as part of a BLA requesting approval to market the drug candidate for a proposed indication. Under the Prescription Drug User Fee Act (PDUFA), as re-authorized most recently in August 2017 (PDUFA VI), the fees payable to the FDA for reviewing a BLA, as well as annual program fees for approved products, can be substantial and typically increase each year. For fiscal years 2018-2022, user fees for review of an application that requires clinical data, such as a BLA, plus prescription drug program fees, are estimated at approximately $2.7 million, subject to certain limited deferrals, waivers, and reductions that may be available, including waiver of the application fee for a product designated for an orphan indication. Each BLA submitted to the FDA for approval is reviewed for administrative completeness and reviewability within 60 days following FDA's receipt of the application. If the BLA is found complete, the FDA will file the BLA, triggering a full review of the application. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission.
The outcome of FDA's review, even if generally favorable, may not be an actual approval but a "complete response letter" that describes additional work that must be done before the application can be approved. Before approving a BLA, the FDA may inspect the facility or facilities at which the product is manufactured and will not approve the BLA unless the facility complies with cGMPs. The FDA may deny approval of a BLA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or information, which can extend the review process. FDA approval of any application may include many delays or never be granted. Any FDA approval may impose limitations on the uses for which the product may be marketed, may require that warning statements be included in the product labeling, may require that additional post-approval studies be conducted as a condition of the approval, and may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a Risk Evaluation and Mitigation Strategy, or REMS, or otherwise limit the scope of any approval. The FDA must approve a BLA supplement or a new BLA before a product may be marketed for other uses or before certain manufacturing or other changes may be made. Further post-marketing testing and surveillance to monitor the safety or efficacy of a product is required. Also, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur following initial marketing. In addition, new government requirements may be established that could delay or prevent regulatory approval of our therapeutic candidates under development.
After BLA approval by the FDA, the manufacturer and the holder(s) of the BLA for the product continue to be subject to comprehensive regulatory oversight. For example, quality control and manufacturing procedures must conform, on an ongoing basis, to cGMP requirements, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to spend time, money and effort to maintain cGMP compliance.
Orphan Drug Act
The Orphan Drug Act provides incentives to manufacturers to develop and market drugs for rare diseases and conditions affecting fewer than 200,000 persons in the United States at the time of application for orphan drug designation. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the holder of the approval is entitled to a seven years of market exclusivity in the United States for that product except in very limited circumstances. For example, a drug that the FDA considers to be clinically superior to, or different from, another approved orphan drug, even though for the same indication, may also obtain approval in the United States during the seven-year exclusive marketing period. In addition, holders of orphan drug exclusivity are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug. REBLOZYL has orphan drug designation in the United States for the treatment of beta-thalassemia and for the treatment of MDS.

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Legislation similar to the Orphan Drug Act has been enacted outside the U.S., including in the EU. The orphan legislation in the EU is available for therapies addressing chronic debilitating or life-threatening conditions that affect five or fewer out of 10,000 persons or are financially not viable to develop. The market exclusivity period is for ten years, although that period can be reduced to six years if, at the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity. The market exclusivity may be extended to 12 years if sponsors complete a pediatric investigation plan agreed upon with the relevant committee of the EMA.
Expedited Review and Approval
The FDA has various programs, including Fast Track, priority review, and accelerated approval, which are intended to expedite or simplify the process for reviewing drugs, and/or provide for the approval of a drug on the basis of a surrogate endpoint (a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome). Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the qualifications or that the time period for FDA review or approval will be shortened. Generally, drugs that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious or life- threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a standard review time of ten months. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the application for a drug designated for priority review. Accelerated approval provides for an earlier approval for a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint, but the FDA may require post-marketing clinical trials as a condition of approval.
In the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law in July 2012, Congress encouraged the FDA to utilize innovative and flexible approaches to the assessment of products under accelerated approval. In addition to the Fast Track, accelerated approval and priority review programs discussed above, the FDA also provided guidance on a new program for Breakthrough Therapy designation. A request for Breakthrough Therapy designation should be submitted concurrently with, or as an amendment to an IND.
Reimbursement
In both domestic and foreign markets, sales and reimbursement of any approved products will depend, in part, on the extent to which the costs of such products will be covered by third-party payers, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payers are increasingly challenging the prices charged for medical products and services and imposing controls to manage costs. 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. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. In addition, there is significant uncertainty regarding the reimbursement status of newly approved healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. If third-party payers do not consider our products to be cost-effective compared to other therapies, the payers may not cover our products after approved as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
Within the United States, if we obtain appropriate approval in the future to market any of our current therapeutic candidates, we may seek approval and coverage for those products under Medicaid, Medicare and the Public Health Service (PHS) pharmaceutical pricing program and also seek to sell the products to federal agencies.
Medicaid is a joint federal and state program administered by the states for low income and disabled beneficiaries. Under the Medicaid Drug Rebate Program, manufacturers are required to pay a rebate for each unit of product reimbursed by the state Medicaid programs. The amount of the rebate for each product is set by law and may be subject to an additional discount if manufacturer-reported average manufacturer price increases more than inflation and if a manufacturer enters into a supplemental rebate agreement with a specific state Medicaid program.
Medicare is a federal program administered by the federal government that covers individuals age 65 and over as well as those with certain disabilities. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that do not need to be administered by a physician). Medicare Part D is administered by private prescription drug

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plans approved by the U.S. government and each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time-to-time.
Medicare Part B covers most injectable and infused drugs administered by a licensed medical provider in hospital outpatient departments and in the physician office setting. Medicare Part B is administered by Medicare Administrative Contractors, which generally have the responsibility of making coverage decisions. Subject to certain payment adjustments and limits, Medicare generally pays for Part B covered drugs based on a percentage of manufacturer-reported average sales price.
Drug products are subject to discounted pricing when purchased by federal agencies via the Federal Supply Schedule (FSS). FSS participation is required for a drug product to be covered and paid for by certain federal agencies and for coverage under Medicaid, Medicare Part B and the PHS pharmaceutical pricing program. FSS pricing is negotiated periodically with the Department of Veterans Affairs and is intended to not exceed the price that a manufacturer charges its most-favored non-federal customer for its product. In addition, prices for drugs purchased by the Veterans Administration, Department of Defense (including drugs purchased by military personnel and dependents through the TRICARE retail pharmacy program), Coast Guard, and PHS are subject to a cap on pricing (known as the "federal ceiling price") and may be subject to an additional discount if pricing increases more than inflation.
To maintain Medicaid Drug Rebate Program coverage, manufacturers must extend discounts to certain purchasers under the PHS pharmaceutical pricing program. Purchasers eligible for discounts include hospitals that serve a disproportionate share of financially needy patients, community health clinics and other entities that receive health services grants from the PHS.
The United States and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, health care, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (“Healthcare Reform Act”) which includes changes to the coverage and reimbursement of drug products under government health care programs. Under the Trump administration, there have been ongoing efforts to modify or repeal all or certain provisions of the Healthcare Reform Act. The Trump administration may also take executive action in the absence of legislative action. For example, in October 2017, the President announced that his administration will withhold the cost-sharing subsidies paid to health insurance exchange plans serving low-income enrollees. Tax reform legislation was also enacted at the end of 2017 that includes provisions that will affect healthcare insurance coverage and payment, such as the elimination of the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019 (the so-called “individual mandate”).
Recently, there has been considerable public and government scrutiny in the U.S. of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. There have also been several recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices or price increases. Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates if approved for sale.
We cannot predict the ultimate content, timing or effect of any changes to the Healthcare Reform Act or other federal and state reform efforts. There is no assurance that federal or state health care reform will not adversely affect our future business and financial results.
Outside the United States, ensuring adequate coverage and payment for our products will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the cost effectiveness of our therapeutic candidates or products to other available therapies, which could be expensive and result in delays in our commercialization efforts. Third-party payers are challenging the prices charged for medical products and services, and many third-party payers limit reimbursement for newly-approved healthcare products. Recent budgetary pressures in many European Union countries are also causing governments to consider or implement various cost-containment measures, such as price freezes, increased price cuts and rebates. If budget pressures continue, governments may implement additional cost-containment measures. Cost-control initiatives could decrease the price we might establish for products that we may develop or sell, which would result in lower product revenues or royalties payable to us. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.

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Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our therapeutic candidates. Whether or not we obtain FDA approval for a therapeutic candidate, we must obtain approval from the comparable regulatory authorities of foreign countries or economic areas, such as the European Union, before we may commence clinical trials or market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.
Certain countries outside of the United States have a process that requires the submission of a clinical trial application much like an IND prior to the commencement of human clinical trials. In Europe, for example, a clinical trial application, or CTA, must be submitted to the competent national health authority and to independent ethics committees in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with a country's requirements, clinical trial development may proceed in that country. In all cases, the clinical trials must be conducted in accordance with good clinical practices, or GCPs, and other applicable regulatory requirements.
Under European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure is compulsory for medicinal products produced by biotechnology or medicinal products containing new active substances for specific indications, and optional for other medicines which are highly innovative. Under the centralized procedure, a marketing application is submitted to the EMA where it will be evaluated by the Committee for Medicinal Products for Human Use and a favorable opinion typically results in the grant by the EC of a single marketing authorization that is valid for all European Union member states within 67 days of receipt of the opinion. The initial marketing authorization is valid for five years, but once renewed is usually valid for an unlimited period. The decentralized procedure provides for approval by one or more "concerned" member states based on an assessment of an application performed by one member state, known as the "reference" member state. Under the decentralized approval procedure, an applicant submits an application, or dossier, and related materials to the reference member state and concerned member states. The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of receiving the reference member state's assessment report, each concerned member state must decide whether to approve the assessment report and related materials. If a member state does not recognize the marketing authorization, the disputed points are eventually referred to the EC, whose decision is binding on all member states.
As in the United States, we may apply for designation of a product as an orphan drug for the treatment of a specific indication in the European Union before the application for marketing authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits, including up to 10 years of market exclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan designated product.
Fraud and Abuse Laws
We are be subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback and false claims laws. Anti-kickback laws generally prohibit a prescription drug manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of a particular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices. There is therefore a possibility that our practices might be challenged under such anti-kickback laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, any claims for payment for reimbursed drugs or services to third party payers (including Medicare and Medicaid) that are false or fraudulent. Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and/or exclusion from federal health care programs (including Medicare and Medicaid).
Laws and regulations enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers with marketed products generally limit financial interactions between manufacturers and health care providers and/or require disclosure to the government and public of such interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any future activities (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to the penalty provisions of the pertinent laws and regulations.
Additional Regulation
We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations. These and other laws govern our use, handling and disposal of various biological and chemical substances

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used in, and waste generated by our operations. Our research and development involves the controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources.
There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biological products, government control and other changes to the U.S. healthcare system. It is uncertain what legislative proposals will be adopted or what actions federal, state or private payers for medical goods and services may take in response to any healthcare reform proposals or legislation. We cannot predict the effect medical or healthcare reforms may have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.
Manufacturing
We currently have the capability to manufacture drug substance for our preclinical studies, Phase 1 clinical trials and Phase 2 clinical trials. We manufacture material compliant to U.S. and European cGMP at our 12,000 square foot multi-product facility located at our corporate headquarters in Cambridge, Massachusetts. We have the capabilities to manufacture receptor fusion proteins, monoclonal antibodies, and other therapeutic candidates.
Our manufacturing facility is based on single use, disposable technology to maximize the focus of personnel and other resources on the production process, minimizing the need for cleaning and sterilization while optimizing the efficiency of product change-over. The facility consists of four independent clean rooms totaling 4,000 square feet. The facility includes one 250 liter and one 1,000 liter single use bioreactor and has space for two additional 1,000 liter bioreactors.
Approximately 49 full time employees focus on our process development and manufacturing activities. We believe that our strategic investment in manufacturing capabilities allows us to advance our therapeutic candidates at a more rapid pace and provides us with more portfolio flexibility than if we used a contract manufacturer. The facility produces drug substance in a cost-effective manner while allowing us to retain control over the process and provides an ability to balance the requirements of multiple programs and avoid costly commitments of funds before clinical data are available.
Our manufacturing capabilities encompass the full manufacturing process through quality control and quality assurance. This structure enables us to efficiently transfer preclinical stage lead molecules into manufacturing. We have designed our manufacturing facility and processes to provide maximum flexibility and rapid change over for the manufacture of different therapeutic candidates. We outsource fill-finish, packaging, labeling, shipping, and distribution.
We manufacture our therapeutic candidates using readily available raw materials and well established manufacturing procedures based on a standardized process modified for each of our therapeutic candidates. We produce our proteins in bioreactors using Chinese hamster ovary cells that have been genetically engineered to produce our specific therapeutic candidates. We then purify the proteins using industry standard methods, which include affinity chromatography and ultrafiltration operations.
For our early phase therapeutic candidates, we intend to continue to manufacture drug substance for preclinical testing and Phase 1 and Phase 2 clinical development at our current facilities, and use third-party contract manufacturers as needed. For the REBLOZYL Phase 3 clinical trials and commercial supply, we have transferred the process for production to BMS under the terms of our collaboration agreement, and BMS uses third-party contract manufacturers. For any future sotatercept Phase 3 clinical trials in the PH field, we intend to use third-party contract manufacturers. For commercial supply of sotatercept if BMS waives its right to manufacture, we intend to use third-party contract manufacturers. For ACE-083, we intend use third party manufacturers for any future Phase 3 clinical or commercial supply.
Employees
As of December 31, 2019, we had 237 full-time employees, 152 of whom are involved in research, development or manufacturing, and 52 of whom have Ph.D. or M.D. degrees. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our relations with our employees to be good.
Corporate Information
We were incorporated in the state of Delaware in June 2003 as Phoenix Pharma, Inc., and we subsequently changed our name to Acceleron Pharma Inc. and commenced operations in February 2004. Our principal executive offices are located at 128 Sidney Street, Cambridge, Massachusetts 02139, and our telephone number is (617) 649-9200. Our Internet address is www.acceleronpharma.com. The contents of our website are not part of this Annual Report on Form 10-K. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act

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of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission.


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Item 1A.    Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Annual Report on Form 10-K before purchasing our common stock. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer, possibly materially. In that case, the trading price of our common stock could fall, and you may lose all or part of the money you paid to buy our common stock. 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 currently believe to be immaterial may also adversely affect our business.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred net operating losses since our inception and anticipate that we may continue to incur substantial operating losses for the foreseeable future. We may never achieve or sustain profitability.
We have incurred net losses during most fiscal periods since our inception. As of December 31, 2019, we had an accumulated deficit of $711.4 million. We do not know whether or when we will become profitable. To date, we have only generated limited revenue from royalties on the sale of our first and only commercial product, REBLOZYL® (luspatercept-aamt), since receiving regulatory approval from the U.S. Food and Drug Administration, or FDA, in November 2019 for the treatment of anemia in adult patients with beta-thalassemia who require regular red blood cell, or RBC, transfusions.
Our losses have resulted principally from costs incurred in our research and development activities, and we anticipate that our expenses will increase in the future as we expand these activities as well as our manufacturing and commercialization activities. In particular, we anticipate that our expenses will increase substantially if and as we:
initiate and continue clinical trials for our therapeutic candidates, including sotatercept in pulmonary hypertension, which we refer to as the PH field, and ACE-083;

continue our research and preclinical development of our therapeutic candidates;

seek to identify and validate additional therapeutic candidates;

require the manufacture of larger quantities of therapeutic candidates for clinical development and, potentially, for commercialization;

establish and maintain a sales, marketing and distribution infrastructure to commercialize any products for which we have or may obtain regulatory approval;

acquire or in-license other therapeutic candidates and technologies;

maintain, protect and expand our intellectual property portfolio;

attract and retain skilled personnel; and

experience any delays or encounter issues with any of the above.
Although we anticipate that these increased expenses will be partially offset by royalty and milestone payments we expect to receive under our agreements with Bristol-Myers Squibb Company, or BMS (which acquired Celgene Corporation in November 2019), if we do not receive the anticipated royalty or milestone payments or do not enter into partnerships for ACE-083 or other therapeutic candidates on acceptable terms, our operating losses will substantially increase over the next several years as we execute our plan to expand our research, development, manufacturing and commercialization activities. As such, there can be no assurance that our losses will not increase prohibitively in the future.
For us to become and remain profitable, we and BMS must succeed in executing our development plans pursuant to our collaboration agreements, including manufacturing, marketing and selling our approved product, REBLOZYL, and obtaining regulatory approval for luspatercept-aamt in additional target indications, including myelodysplastic syndromes, or MDS. In addition, we or our other current or future partners must succeed in developing our other therapeutic candidates, obtaining regulatory approval for them, and manufacturing, marketing and selling any other products for which we or our partners may obtain regulatory approval. We or they may not succeed in these activities, and we may never generate revenue from product sales that is significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

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We may require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
As of December 31, 2019, our cash, cash equivalents and investments were $453.8 million. We believe that we will continue to expend substantial resources for the foreseeable future developing sotatercept in the PH field, ACE-083 and new therapeutic candidates. These expenditures will include costs associated with research and development, potentially acquiring new technologies, conducting preclinical studies and clinical trials, manufacturing therapeutic candidates, potentially obtaining regulatory approvals, as well as manufacturing, marketing and selling future products approved for sale, if any. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our therapeutic candidates.
BMS generally pays development, manufacturing and commercialization and certain patent costs for REBLOZYL and for sotatercept outside of the PH field as approved in the budgets agreed to between us and BMS for each program. Activities that we elect to conduct to support REBLOZYL outside of the approved budgets with BMS are at our own expense. Other than those costs, our future capital requirements depend on many factors, particularly in connection with the development of our other therapeutic candidates including sotatercept in the PH field and ACE-083:
the scope, progress, results and costs of researching and developing our other therapeutic candidates, and conducting preclinical studies and clinical trials;

the timing of, and the costs involved in, obtaining regulatory approvals for our other therapeutic candidates if clinical trials are successful;

the cost of commercialization activities for our other therapeutic candidates, if any of these therapeutic candidates is approved for sale, including marketing, sales and distribution costs;

the cost of manufacturing our other therapeutic candidates for clinical trials in preparation for regulatory approval and in preparation for commercialization;

our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and

the timing, receipt, and amount of sales of, or royalties on, our future products, if any.
Our current operating plan may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe that we have sufficient funds for our current or future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of our therapeutic candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our therapeutic candidates.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or therapeutic candidates on terms unfavorable to us.
We may seek additional capital through a variety of means, including through private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships with third parties, we may have to relinquish valuable rights to our technologies or therapeutic candidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for sotatercept in the PH field, ACE-083 or other therapeutic candidates, or grant rights to develop and market therapeutic candidates that we would otherwise prefer to develop and market ourselves.
If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements are

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incorrect, our actual results may vary from those reflected in our projections and accruals.
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure you, however, that our estimates, or the assumptions underlying them, will be correct. Actual results may differ materially from those estimated amounts used in the preparation of our consolidated financial statements if these results differ from our historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.
Further, we rely on BMS to report REBLOZYL sales data and our related royalty revenue to us in a timely and accurate manner. If BMS fails to do so, we may under- or over-state our collaboration revenue.
From time to time we may issue financial guidance relating to our expectations for our royalty revenue or our cash, cash equivalents and investments available for operations, which guidance is based on estimates and the judgment of management. If, for any reason, our expenses or royalty revenue differ materially from our guidance or we utilize our cash more quickly than anticipated, we may have to adjust our publicly announced financial guidance. If we fail to meet, or if we are required to change or update any element of, our publicly disclosed financial guidance or other expectations about our business, our stock price could decline.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or cause any guidance we may provide to be inaccurate.
Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year. Due to the recent approval by the FDA of REBLOZYL and the absence of historical sales data, our royalty revenue from product sales will be difficult to predict from period to period. Our revenues will also depend on the receipt of development, regulatory and commercial milestone payments under our agreements with BMS, as well as payments we may receive under new collaboration arrangements we may enter into with third parties. These payments may vary significantly from quarter to quarter and any such variance could cause a significant fluctuation in our revenue from one quarter to the next.
Further, changes in our operations, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline programs, or our undertaking of additional programs, business activities, or entry into strategic transactions, including potential future acquisitions of products, technologies or businesses may also cause significant fluctuations in our expenses.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Our past results may not be a reliable indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.

Risks Related to Regulatory Review and Approval of REBLOZYL and Our Therapeutic Candidates
If we or our partners do not obtain regulatory approval for luspatercept-aamt in MDS or other target indications, or for our other current and future therapeutic candidates, our business will be adversely affected.
REBLOZYL and our therapeutic candidates are subject to extensive governmental regulations relating to development, clinical trials, manufacturing and commercialization, among other things. In order to obtain regulatory approval for the commercial sale of any therapeutic candidates, we or our partners must demonstrate through extensive preclinical studies and clinical trials that the therapeutic candidate is safe and effective for use in each target indication. Clinical testing is expensive, time-consuming and uncertain as to outcome. We or our partners may gain regulatory approval for REBLOZYL, sotatercept, ACE-083 or any other therapeutic candidate in some but not all of the territories available or some but not all of the target indications or may receive approval with limited labeling or boxed warnings, resulting in limited commercial opportunity for the approved products, or we or they may never obtain regulatory approval for these therapeutic candidates. For example, although the FDA approved REBLOZYL in November 2019 for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions, a supplemental Biologics License Application, or sBLA, for luspatercept-aamt remains

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under review by the FDA for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. In addition, regulatory applications for luspatercept-aamt remain under review by the European Medicines Agency, or EMA, in both beta-thalassemia and MDS. Further, luspatercept-aamt is also in clinical development in myelofibrosis. There can be no assurance that the FDA or EMA will approve any of these regulatory applications or that luspatercept-aamt will gain regulatory approval in MDS, myelofibrosis or any other potential future target indication.
Delays in the commencement, enrollment or completion of clinical trials of our therapeutic candidates could result in increased costs to us as well as a delay or failure in obtaining regulatory approval, or prevent us from commercializing our therapeutic candidates on a timely basis, or at all.
We cannot guarantee that our or our partners' clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely commencement, enrollment or completion of clinical development include:
delays by us or our current or future partners in reaching a consensus with regulatory agencies on trial design;

delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;

delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site;

delays in recruiting suitable patients to participate in clinical trials;

imposition of a clinical hold by regulatory agencies for any reason, including safety or manufacturing concerns or after an inspection of clinical operations or trial sites;

failure by CROs, other third parties or us or our current or future partners to adhere to clinical trial requirements;

failure to perform in accordance with the FDA's good clinical practices, or GCP, or applicable regulatory guidelines in other countries;

delays in the testing, validation, manufacturing and delivery of the therapeutic candidates to the clinical sites;

delays caused by patients not completing participation in a trial or not returning for post-treatment follow-up;

clinical trial sites or patients dropping out of a trial;

occurrence of serious adverse events in clinical trials that are associated with the therapeutic candidates that are viewed to outweigh its potential benefits;

delays resulting from the FDA's inability to timely review and process any submissions we or BMS have filed during the pendency of a whole or partial U.S. government shutdown; or

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.
Delays, including delays caused by the above factors, can be costly and could negatively affect our or BMS's ability to complete a clinical trial. If we or BMS are not able to successfully complete clinical trials of our therapeutic candidates, we will not be able to obtain regulatory approval and will not be able to commercialize such therapeutic candidates or expand our products into additional indications.

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There is a high risk of clinical failure at any stage of clinical development, and, as a result, we may not succeed in developing our therapeutic candidates into marketable products.
Our encouraging preclinical and clinical results to date for luspatercept-aamt, sotatercept, and ACE-083 in Charcot-Marie-Tooth disease, or CMT, are not necessarily predictive of the results of our ongoing or future clinical trials. Promising results in preclinical studies of a drug candidate may not be predictive of similar results in humans during clinical trials, and successful results from early clinical trials of a drug candidate may not be replicated in later and larger clinical trials or in clinical trials for different indications. If the results of our or our current or future partners' ongoing or future clinical trials are inconclusive with respect to the efficacy of our therapeutic candidates or if we or they do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse events associated with our therapeutic candidates, we or our partner may be prevented or delayed in obtaining regulatory approval for our therapeutic candidates. We routinely develop our therapeutic candidates in multiple indications and our therapeutic candidates are at multiple stages of development at any given time, and any data, including safety or efficacy data, from any of our clinical trials could have a negative effect on our other clinical trials for the same or different therapeutic candidates. For example, if we or BMS observe negative data in any one or more of our luspatercept-aamt clinical trials, this data could have an adverse effect on our ability to market REBLOZYL in its currently approved indication or to obtain regulatory approval for luspatercept-aamt in MDS or any other new indication.
In addition, data obtained from trials and studies, including extension studies, are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay or prevent regulatory approval. Alternatively, regulators may ask us to conduct more rigorous studies or trials or studies with endpoints that are different from the studies we are currently conducting. Successful achievement of study endpoints does not guarantee progression to further clinical development, receipt of regulatory approval or commercialization. Even if we or our partners obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We or our partners may also be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a risk evaluation and mitigation strategy.
If we or our current or future partners fail to obtain regulatory approval in jurisdictions outside the United States, we and they will not be able to market our products in those jurisdictions.
We and our current or future partners intend to market REBLOZYL and our therapeutic candidates, if approved, in international markets. Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The approval procedures vary from country-to-country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a therapeutic candidate must be approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We or our current or future partners may not obtain foreign regulatory approvals on a timely basis, if at all. In particular, although BMS has submitted a marketing authorization application, or MAA, to the EMA for luspatercept-aamt for the treatment of adult patients with MDS-associated anemia and for the treatment of adult patients with beta-thalassemia-associated anemia, BMS may not be successful in obtaining EMA approval of luspatercept-aamt in either indication on a timely basis, or ever. We or our partners may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.
We and, for our BMS partnered programs, BMS, regularly request and receive guidance from the FDA and foreign regulators regarding the design or conduct of clinical trials with luspatercept-aamt and our therapeutic candidates. This guidance is not binding on these agencies and their policies and guidance could change substantially and unpredictably, potentially in a way that makes our clinical trials or our path to regulatory approval longer, more expensive or otherwise more difficult.
Any guidance that we or BMS receive from the FDA or foreign regulators regarding the design or conduct of our or BMS's clinical trials is not necessarily indicative of what these regulators will eventually require from us or BMS to obtain regulatory approval of our therapeutic candidates or luspatercept-aamt in any new indications. These regulators typically caution that any guidance received from them represents their then-current thinking, does not create or confer any rights to us or BMS, and does not operate to bind the regulator. If later guidance that we or BMS receive from the FDA or foreign regulators regarding our clinical trial design or conduct is materially different than the current guidance we have received from these regulators, we may need to change our clinical development plans and it may take longer, be more expensive or otherwise be more difficult to obtain FDA or foreign regulatory approval of our therapeutic candidates and our business may be materially harmed.

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We undertake no obligation to disclose guidance that we or BMS may receive from the FDA or foreign regulators. Any guidance from the FDA or foreign regulators that we may disclose publicly speaks only as of the date of such disclosure. We undertake no obligation to update any disclosure we make regarding regulator guidance to reflect additional regulatory guidance received after the date of such disclosure or to reflect the occurrence of unanticipated events that may affect the guidance.
REBLOZYL and any of our therapeutic candidates that receive regulatory approval will remain subject to ongoing regulatory review, which may result in significant additional expense. Additionally, REBLOZYL and our therapeutic candidates, if approved, could be subject to labeling and other restrictions, and we or our current or future partners may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we or our current or future partners receive for REBLOZYL or our therapeutic candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy. In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for REBLOZYL and any other therapeutic candidate that receives FDA approval 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 practice, or cGMP, and GCP, for any clinical trials that we or our partners conduct post-approval.
The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use. If we do not market REBLOZYL or any other therapeutic candidate that receives FDA approval for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the federal Food, Drug and Cosmetic Act and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws, which violations may result in the imposition of significant administrative, civil and criminal penalties.
Later discovery of previously unknown problems with REBLOZYL or another approved therapeutic candidate, including adverse events of unanticipated severity or frequency, or with manufacturing operations or processes, or failure to comply with regulatory requirements, may result in, among other things:
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product 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 our partners, or suspension or revocation of product license approvals;

product seizure or detention, or refusal to permit the import or export of products; and

injunctions or the imposition of civil or criminal penalties.
The policies of the FDA and other regulatory agencies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our therapeutic candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our partners are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or not able to maintain regulatory compliance, we or our partners may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.
A Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
The FDA grants Fast Track designation to therapies that are considered capable of addressing unmet medical needs and possess the potential to treat serious or life-threatening disease conditions in order to facilitate its development and expedite the review procedure. The FDA has broad discretion in granting Fast Track designation, so even if we believe that a particular product candidate is eligible for such designation, the FDA could decide not to grant it. Even though luspatercept-aamt has

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received Fast Track designation in certain indications, we may not experience a faster development process, review or approval, or receive FDA approval at all, in any of those indications compared to conventional FDA procedures. A Fast Track designation does not change the standards for approval. The FDA may also withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.
The ongoing clinical trials with luspatercept-aamt may be delayed, suspended or terminated, or may not lead to marketing approval.
For luspatercept-aamt, BMS is currently conducting a Phase 2 clinical trial in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, with preliminary topline results currently expected by the end of 2020, and a Phase 3 clinical trial, the COMMANDS trial, in first-line, lower-risk MDS patients. BMS is also conducting a Phase 2 clinical trial in patients with myelofibrosis-associated anemia. Based on data from this trial that were presented in December 2019, we and BMS announced our intent to initiate in 2020 a pivotal phase 3 INDEPENDENCE trial of luspatercept-aamt in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions. We are also currently conducting two long-term Phase 2 extension studies with luspatercept-aamt - one in patients with MDS and another in patients with beta-thalassemia. BMS or we may experience delays in the conduct of these clinical trials, including delays related to patients withdrawing from the trial, or drug supply. If patients experience adverse events while in clinical trials with luspatercept-aamt, then one or more of these trials may be delayed, suspended or terminated. BMS may not achieve any of the endpoints in these ongoing trials. Additionally, we and BMS have announced that we are planning to evaluate luspatercept-aamt in one or more indications beyond MDS, beta-thalassemia and myelofibrosis. Even though the primary endpoint and key secondary endpoints were achieved in the Phase 3 MEDALIST and BELIEVE trials, and the FDA approved REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions, one or more health authorities may not approve luspatercept-aamt for all of the desired indications. The MEDALIST and BELIEVE trials were designed with input from health authorities in many different countries, but this guidance is not binding on these regulators, and it may be necessary to conduct one or more additional clinical trials in order to achieve marketing authorization in one or more regulatory jurisdictions. Guidance that we or BMS receive from the FDA or foreign regulators regarding the design or conduct of the MEDALIST or BELIEVE clinical trials is not necessarily indicative of what these regulators will eventually require from us or BMS to obtain regulatory approval of luspatercept-aamt in these indications. Any regulatory approvals that we or BMS receive for luspatercept-aamt may also be subject to limitations on the approved indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy.
If we or any of our current or future partners violate the guidelines pertaining to promotion and advertising of REBLOZYL or any of our therapeutic candidates, if approved, we or they may be subject to disciplinary action by the FDA's Office of Prescription Drug Promotion (OPDP) or other regulatory authorities.
The FDA's Office of Prescription Drug Promotion, or OPDP, is responsible for reviewing prescription drug advertising and promotional labeling to ensure that the information contained in these materials is not false or misleading. There are specific disclosure requirements, and the applicable regulations mandate that advertisements cannot be false or misleading or omit material facts about the product. Prescription drug promotional materials must present a fair balance between the drug's effectiveness and the risks associated with its use. Most warning letters from OPDP cite inadequate disclosure of risk information.
OPDP prioritizes its actions based on the degree of risk to the public health, and often focuses on newly introduced drugs and those associated with significant health risks. There are two types of letters that OPDP typically sends to companies that violate its drug advertising and promotional guidelines: untitled letters and warning letters. In the case of an untitled letter, OPDP typically alerts the drug company of the violation and issues a directive to refrain from future violations, but does not typically demand other corrective action. A warning letter is typically issued in cases that are more serious or where the company is a repeat offender. Although we have not received any such letters from OPDP, we or any of our current or future partners may inadvertently violate OPDP's guidelines in the future and be subject to an OPDP untitled letter or warning letter, which may have a negative impact on our business.

Risks Related to Our Reliance on Third Parties
We are dependent on BMS for the successful development and commercialization of our first approved product, REBLOZYL, and for sotatercept outside of the PH field. If BMS does not devote sufficient resources to the development and commercialization of REBLOZYL, discontinues development or commercialization of REBLOZYL, is unsuccessful in its efforts, or chooses to terminate the REBLOZYL agreement with us, our business will be materially harmed.

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We have entered into collaboration agreements with BMS to develop and commercialize sotatercept and REBLOZYL. Pursuant to the sotatercept agreement, responsibility for all clinical and other product development activities for sotatercept for all indications outside of the PH field and for manufacturing sotatercept for such indications has been transferred to BMS. Pursuant to the REBLOZYL agreement, following FDA approval of REBLOZYL in November 2019 for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions, BMS is solely responsible for all product development activities for REBLOZYL. We have a co-promotion right in North America and our commercialization costs provided in the commercialization plan and budget approved by the Joint Commercialization Committee, or JCC, are entirely funded by BMS. Activities that we elect to conduct outside of the commercialization plan and budget to support the commercialization of REBLOZYL are at our own expense.
Our ability to generate royalty and milestone revenues from sales of REBLOZYL and, if approved, sotatercept outside of the PH field, is largely dependent on BMS's performance of its development and commercialization obligations. Under our collaboration agreements, when BMS takes over development activities of a therapeutic candidate, it may determine the development plan and activities for that therapeutic candidate. We may disagree with BMS about the development strategy it employs, but we will have no rights to impose our development strategy on BMS. Similarly, BMS may decide to seek regulatory approval for, and limit commercialization of, either or both of REBLOZYL and, outside of the PH field, sotatercept, to narrower indications than we would pursue. We would be prevented from developing or commercializing a candidate in an indication that BMS has chosen not to pursue, other than sotatercept in the PH field. More broadly, if BMS elects to discontinue the development of sotatercept outside of the PH field and/or REBLOZYL, we may be unable to advance the products ourselves. Further, on review of the safety and efficacy data available to date, the FDA may impose requirements on a clinical trial program that would render the program commercially nonviable. In the event of any such decision, we would be unable to advance such program ourselves.
Pursuant to our collaboration agreement with BMS for the development of sotatercept in the PH field, we will rely on BMS for many aspects of our development of sotatercept in the PH field, including, for example, regulatory support. If BMS fails to perform its obligations under the sotatercept agreement, our ability to develop sotatercept in the PH field may be materially harmed.
This partnership may not be scientifically or commercially successful due to a number of important factors, including the following:
BMS has wide discretion in determining the efforts and resources that it will apply to its partnership with us. The timing and amount of any development, regulatory and commercial milestones and royalties that we may receive under such partnership will depend on, among other things, the efforts, allocation of resources and successful development and commercialization of these therapeutic candidates by BMS.

BMS may develop and commercialize, either alone or with others, products that are similar to or competitive with the therapeutic candidates that are the subject of its partnerships with us.

BMS may terminate its partnership with us without cause and for circumstances outside of our control, which could make it difficult for us to attract new strategic partners or adversely affect how we are perceived in scientific and financial communities.

BMS may develop or commercialize our product or therapeutic candidates in such a way as to elicit litigation that could jeopardize or invalidate our intellectual property rights or expose us to potential liability.

BMS may not comply with all applicable regulatory requirements, or may fail to report safety data in accordance with all applicable regulatory requirements.

If BMS were to breach its arrangements with us, we may need to enforce our right to terminate the agreement in legal proceedings, which could be costly and cause delay in our ability to receive rights back to the relevant product or therapeutic candidates. If we were to terminate an agreement with BMS due to BMS's breach or BMS terminated the agreement without cause, the development and commercialization of sotatercept and REBLOZYL could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue development and commercialization of REBLOZYL and sotatercept on our own if we choose not to, or are unable to, enter into a new collaboration for them.

BMS may enter into one or more transactions with third parties, including a merger, consolidation, reorganization, sale of substantial assets, sale of substantial stock or other change in control, which could divert the attention of its management and adversely affect BMS's ability to retain and motivate key personnel who are important to the

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continued development of the programs under the strategic partnership with us. In addition, the third-party to any such transaction could determine to reprioritize BMS's development programs such that BMS ceases to diligently pursue the development of our programs and/or cause the respective partnership with us to terminate.
Although we are continuing to build out our commercial infrastructure, we currently have limited marketing, sales and distribution experience and capabilities and we are dependent upon BMS for commercialization of REBLOZYL and will be dependent upon BMS for commercialization of sotatercept outside of the PH field.
For REBLOZYL and, outside of the PH field, sotatercept, we and BMS share commercialization obligations in North American and we are solely dependent on BMS for commercialization outside of North America. In connection with the recent launch of REBLOZYL as our first commercial product, and to meet our co-promotion obligations in the United States, in 2019 we hired a limited sales force and continued to build out our commercial infrastructure. However, as a company with only one recently approved commercial product, our marketing, sales and distribution experience and capabilities in the United States remain very limited. To successfully commercialize REBLOZYL and, outside of the PH field, sotatercept, in the United States, we rely extensively on BMS, and we will need to continue to establish and maintain our own adequate marketing, sales and distribution capabilities. In addition, to successfully commercialize our wholly-owned therapeutic candidates and sotatercept in the PH field in jurisdictions where they may be approved, we will need to expand our own marketing, sales and distribution capabilities. Failure to continue to establish and further expand these capabilities, whether due to insufficient resources or some other cause, will limit or potentially halt our ability to successfully commercialize any therapeutic candidates, and will adversely affect our financial results. Even if we do develop such capabilities, we will compete with other companies that have more experienced and well-funded marketing, sales and distribution operations.
We and BMS routinely publicly disclose information about REBLOZYL and sotatercept, and if our and BMS's public disclosures are inconsistent, this could materially harm public and market perception of REBLOZYL and sotatercept and the value of our common stock.
Through a variety of public forums and media, such as press releases, conference calls, filings with the Securities and Exchange Commission, or SEC, and scientific/medical conferences, we and BMS routinely disclose information about REBLOZYL and sotatercept. We and BMS may not agree on information that is disclosed or the interpretation of that information, and our disclosures may be inconsistent with BMS's disclosures. If our and BMS's public disclosures are inconsistent, public and market perception of REBLOZYL and sotatercept and the value of our common stock could be materially adversely affected.
We and BMS rely on third parties to conduct preclinical studies and clinical trials for our therapeutic candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our therapeutic candidates.
We design the clinical trials for sotatercept in the PH field and ACE-083, and will do so for any future unpartnered therapeutic candidates, and we will continue to work with BMS on any ongoing or future trials for luspatercept-aamt and sotatercept outside of the PH field. However, we and BMS rely on CROs and other third parties to assist in managing, monitoring and otherwise carrying out many of these trials. We and BMS compete with many other companies for the resources of these third parties. The third parties on whom we and BMS rely generally may terminate their engagements at any time, and having to enter into alternative arrangements would delay development and commercialization of our therapeutic candidates.
The FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing, and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we and BMS rely on third parties to conduct many of our and their clinical trials, we and BMS are responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan, protocol and other requirements.
If these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our therapeutic candidates may not meet regulatory requirements or may be delayed. If clinical trials do not meet regulatory requirements or if these third parties need to be replaced, preclinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we or BMS may not be able to obtain regulatory approval of our therapeutic candidates on a timely basis or at all.

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In addition to our internal manufacturing, we rely on third-party manufacturers in the production and testing of our therapeutic candidates, and any failure by a third-party manufacturer may delay or impair our ability to complete clinical trials or commercialize our therapeutic candidates.
Manufacturing biologic drugs is complicated and is tightly regulated by the FDA, the EMA and comparable regulatory authorities around the world. For our early phase therapeutic candidates, we intend to continue to manufacture drug substance for preclinical testing and Phase 1 and Phase 2 clinical development at our current facilities, and use third-party contract manufacturing organizations as needed. For Phase 3 clinical trials of sotatercept in the PH field and for Phase 3 clinical trials and commercial supply of our products that we have not partnered, we expect to use contract manufacturing organizations. Successfully transferring complicated manufacturing techniques to contract manufacturing organizations and scaling up these techniques for commercial quantities will be time consuming and we may not be able to achieve such transfer. Moreover, the market for contract manufacturing services for therapeutic candidates is highly cyclical, with periods of relatively abundant capacity alternating with periods in which there is little available capacity. If any need we have for contract manufacturing services increases during a period of industry-wide tight capacity, we may not be able to access the required capacity on a timely basis or on commercially viable terms.
In addition, we contract with fill & finishing providers with the appropriate expertise, facilities and scale to meet our needs. Failure to maintain cGMP can result in a contractor receiving FDA sanctions, which can impact our contractors' ability to operate or lead to delays in our clinical development programs. We believe that our current fill & finish contractors are operating in accordance with cGMP, but we can give no assurance that FDA or other regulatory agencies will agree. In addition, any delay in contracting for fill & finish services, or failure of the contract manufacturer to perform the services as needed, may impair or render unusable the patient data from then-ongoing clinical trials and/or delay clinical trials, registration and launches. Any such issues may have a substantial negative effect on our business.
We rely on our collaboration partner, BMS, to manufacture, or contract for the manufacture of, bulk drug substance and finished drug product for use in late stage clinical trials and for commercial supplies of REBLOZYL and sotatercept. Any failure by BMS or by third parties with which BMS contracts may delay or impair the ability to complete late stage clinical trials or commercialize either or both of sotatercept, if approved, and REBLOZYL.
BMS is responsible for manufacturing all commercial supplies of REBLOZYL. Further, BMS is responsible for manufacturing REBLOZYL and sotatercept for all BMS-sponsored clinical trials. BMS generally does not perform the manufacture of the drug substance or drug product for either REBLOZYL or sotatercept itself. BMS has used and may continue to use contract manufacturers for the manufacture of drug substance and drug product for REBLOZYL and sotatercept, and we have no expectation that BMS plans to perform the manufacture of bulk drug substance or drug product for either REBLOZYL or sotatercept in the future. However, BMS would have the right to manufacture REBLOZYL or sotatercept outside of the PH field for clinical and commercial supply and in the PH field for commercial supply, itself or through the use of contract manufacturers. We understand that BMS has entered into manufacturing arrangements for clinical and commercial supplies of sotatercept and REBLOZYL bulk drug substance with contract manufacturers with considerable biotherapeutics manufacturing experience, including manufacturing monoclonal antibodies through processes similar to those used for sotatercept. If any of these manufacturers is unwilling or unable to manufacture sufficient quantities of sotatercept and/or REBLOZYL to meet clinical or commercial demand, either for technical or business reasons, the development and commercialization of sotatercept and/or REBLOZYL may be delayed, and sales of REBLOZYL, as well as sotatercept, if approved, may be materially harmed.
We may not be successful in establishing and maintaining additional strategic partnerships, which could adversely affect our ability to develop and commercialize products, negatively impacting our operating results.
In addition to our current collaborations with BMS, part of our strategy is to evaluate and enter into additional partnerships in the future for our other product candidates when strategically attractive, including potentially with major biotechnology or pharmaceutical companies. We face significant competition in seeking appropriate partners for our therapeutic candidates, and the negotiation process is time-consuming and complex. In order for us to successfully partner our therapeutic candidates, potential partners must view these therapeutic candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other companies. Even if we are successful in our efforts to establish new strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a therapeutic candidate is delayed or sales of an approved product are disappointing. Any delay in entering into new strategic partnership agreements related to our other therapeutic candidates could delay the development and commercialization of these therapeutic candidates and reduce their competitiveness even if they reach the market.
If we fail to establish and maintain additional strategic partnerships related to ACE-083 or other therapeutic candidates, we will bear all of the risk and costs related to the development of any such therapeutic candidate, and we may need to seek

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additional financing, hire additional employees and otherwise develop expertise for which we have not budgeted. This could negatively affect the development of any unpartnered therapeutic candidate.

Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to REBLOZYL or our therapeutic candidates, we may not be able to compete effectively.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our platform technology, our product, REBLOZYL, and our therapeutic candidates. The patent position of biotechnology companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the United States Patent and Trademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product or our therapeutic candidates in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found. We may be unaware of prior art that could be used to invalidate an issued patent or prevent our pending patent applications from issuing as patents. Even if patents do successfully issue and even if such patents cover our product or our therapeutic candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product or our therapeutic candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
If patent applications we hold or have in-licensed with respect to our platform, our product or our therapeutic candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product or therapeutic candidates, it could dissuade companies from collaborating with us. We regularly file patent applications to cover our product and our therapeutic candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful challenge to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of our product or any therapeutic candidate that we or our current or future partners may develop. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to our product or a therapeutic candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by the USPTO or a third party to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent and the protection it affords is limited. If we encounter delays in obtaining regulatory approvals, the period of time during which we or our current or future partners could market our product or a therapeutic candidate under patent protection could be reduced. Even if patents covering our product or therapeutic candidates are obtained, once the patent life has expired for a product, we may be open to competition from biosimilar products.
Any loss of patent protection could have a material adverse impact on our business. We and our current or future partners may be unable to prevent competitors from entering the market with a product that is similar to or the same as our product or our therapeutic candidates. In addition, the royalty we would receive under our collaboration agreements with BMS for sotatercept and REBLOZYL would be reduced by 50% if such product ceases to be covered by a valid claim of our patents even if no competitor with a similar product has entered the market.

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Third-party claims of intellectual property infringement or misappropriation may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on us and our current or future partners not infringing the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we and our current or future partners are commercializing our product and developing and may develop our therapeutic candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product or our therapeutic candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product or our therapeutic candidates, that we failed to identify. For example, applications filed before November 29, 2000 and certain applications filed after that date that will not be filed outside the United States remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing. Therefore, patent applications covering our platform technology, our product, or our therapeutic candidates could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our product, our therapeutic candidates or the use or manufacture of our product or our therapeutic candidates.
If any third-party patents were held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture or methods for treatment, the holders of any such patents would be able to block our ability to develop and commercialize the applicable product or therapeutic candidate until such patent expired or unless we or our partners obtain a license. These licenses may not be available on acceptable terms, if at all. Even if we or our partners were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we or our partners could be prevented from commercializing a product or therapeutic candidate, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our partners are unable to enter into licenses on acceptable terms. If BMS is required to enter a license agreement with a third party in order to import, develop, manufacture or commercialize sotatercept or REBLOZYL, the royalty rate and sales milestone payments that we could receive may be reduced by up to 50%. This could harm our business significantly.
Parties making claims against us or our partners may obtain injunctive or other equitable relief, which could effectively block our or our partners' ability to further develop and commercialize our product or one or more of our therapeutic candidates. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business. In the event of a successful claim of infringement against us or our partners, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
We may face a claim of misappropriation if a third party believes that we inappropriately obtained and used trade secrets of such third party. If we are found to have misappropriated a third party's trade secrets, we may be prevented from further using such trade secrets, limiting our ability to develop and commercialize our product or our therapeutic candidates, and we may be required to pay damages.
During the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our product, therapeutic candidates, programs, or intellectual property could be diminished. Accordingly, the market price of our common stock could decline.
We have in-licensed, and may in the future in-license, a portion of our intellectual property, and, if we fail to comply with our obligations under these arrangements, we could lose such intellectual property rights or owe damages to the licensor of such intellectual property.
We are a party to a number of license agreements that are important to our business, and we may enter into additional license agreements in the future. As part of our discovery and development activities, we routinely evaluate in-licenses from

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academic and research institutions. See "Business–Intellectual Property–In-Licenses" for a description of our license agreements.
Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If there is any conflict, dispute, disagreement or issue of non-performance between us and our licensing partners regarding our rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement, we may owe damages, our licensor may have a right to terminate the affected license, and our and our partners' ability to utilize the affected intellectual property in our drug discovery and development efforts, and our ability to enter into collaboration or marketing agreements for an affected product or therapeutic candidate, may be adversely affected.
If we do not obtain patent term extension and data exclusivity for any therapeutic candidates we may develop, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any therapeutic candidates we may develop, one or more of our owned or licensed U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the United States and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request or we fail to choose the most optimal patents to extend, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our platform technology and discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, and outside scientific advisors, contractors and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or outside scientific advisors might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protect trade secrets. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business.

Risks Related to Development and Commercialization of REBLOZYL and Our Therapeutic Candidates
Our future commercial success depends upon attaining significant market acceptance of REBLOZYL and our therapeutic candidates, if approved, among physicians, patients, healthcare payers and acceptance by the operators of major medical providers.
REBLOZYL or any of our therapeutic candidates that receive regulatory approval may not gain market acceptance among physicians, healthcare payers, patients and the medical community. Market acceptance of any approved products depends on a number of factors, including:
the efficacy and safety of the product, as demonstrated in clinical trials;

the clinical indications for which the product is approved and the label approved by regulatory authorities for use with the product, including any warnings that may be required on the label;

acceptance by physicians and patients of the product as a safe and effective treatment;

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decisions by healthcare organizations to utilize the product;

the cost, safety and efficacy of treatment in relation to alternative treatments;

the availability of adequate reimbursement and pricing by third party payers and government authorities;

the continued projected growth of drug markets in our various indications;

relative convenience and ease of administration;

the prevalence and severity of adverse side effects; and

the effectiveness of our and our current or future partners' sales and marketing efforts.
Market acceptance is critical to our ability to generate significant revenue. REBLOZYL and any therapeutic candidate, if approved and commercialized, may be accepted in only limited capacities or not at all. If REBLOZYL or any future approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.
Reimbursement may be limited or unavailable in certain market segments for REBLOZYL or our therapeutic candidates, which could make it difficult for us to sell our products profitably.
Market acceptance and sales of REBLOZYL and any other approved therapeutic candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payers and may be affected by existing and future healthcare reform measures. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-party payer may depend upon a number of factors, including the third-party payer's determination that use of a product is:
a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective; and

neither experimental nor investigational.
Obtaining coverage and reimbursement approval for a product from a government or other third party payer is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payer. We or our current or future partners may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for REBLOZYL or any of our therapeutic candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products. In addition, in the United States, third-party payers are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs.
The market opportunities for REBLOZYL or any of our therapeutic candidates may be smaller than we believe them to be, and even if we are able to achieve significant market share for an approved product within a particular indication, we may not achieve profitability.
We focus our research and product development on treatments for serious and rare diseases. Our projections of both the number of people who have the diseases that we are targeting, as well as the subset of people with these diseases who have the potential to benefit from treatment with REBLOZYL or any of our therapeutic candidates, are based on estimates. These estimates have been derived from a variety of sources and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower or more difficult to identify than expected, which could result in the market opportunities for REBLOZYL or our therapeutic candidates being smaller than we expect.

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In addition, even if we obtain significant market share for a product within an approved indication, if the potential target population for the related product is small, we may never achieve profitability without obtaining regulatory approval for additional indications. For instance, REBLOZYL is currently only approved for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions. We may never achieve profitability without obtaining regulatory approval for luspatercept-aamt in additional indications, such as MDS.
Price controls and price pressure may be imposed in foreign and U.S. markets, which may adversely affect our future profitability.
In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders, including those in the United States, on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our current or future partners may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of REBLOZYL or our therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payers or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.
Recent and future healthcare reform legislation and other changes in the healthcare industry and in healthcare spending may adversely affect our business model.
Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations and financial condition. There is significant interest in promoting healthcare reform, as evidenced by public discourse on the topic. See "Business–Government Regulation" for a detailed description on recent developments in healthcare regulations. It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect:
public and market perceptions of our future business prospects, including future revenue and profitability;

the demand for any drug products for which we may obtain regulatory approval;

our ability to set a price that we believe is fair for our products;

our ability to obtain coverage and reimbursement approval for a product;

our ability to generate revenues and achieve or maintain profitability; and

the level of taxes that we are required to pay.
We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.
Our future success depends on our or our partners' ability to demonstrate and maintain a competitive advantage with respect to the design, development and commercialization of REBLOZYL and our therapeutic candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability and safety. In many cases, REBLOZYL and the other products that we commercialize with our strategic partners or on our own will compete with existing, market-leading products. See "Business–Competition" for a detailed description of the competitive landscape for REBLOZYL and our therapeutic candidates.
Many of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and in manufacturing pharmaceutical products. These companies

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also have significantly greater research and marketing capabilities than we do and may also have multiple products that have been approved or are in late stages of development, and have collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make REBLOZYL or the therapeutic candidates that we develop obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing therapeutic candidates before we do. In addition, any new product like REBLOZYL that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential competitors, our business will not grow and our financial condition and operations will suffer.
If our clinical trials fail to demonstrate the safety and efficacy of REBLOZYL in any new indications or our therapeutic candidates to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of REBLOZYL in such indications or our therapeutic candidates.
Undesirable side effects caused by REBLOZYL or our therapeutic candidates could cause us, BMS or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential products liability claims. We and BMS are currently conducting a number of clinical trials for REBLOZYL and our clinical stage therapeutic candidates. Serious adverse events deemed to be caused by REBLOZYL or our therapeutic candidates could have a material adverse effect on the development of our therapeutic candidates and our business as a whole. In the case of placebo-controlled clinical trials, if the rate of an adverse event or serious adverse event observed in the treatment group exceeds the rate of such adverse event or serious adverse event observed in the placebo-controlled group, then the FDA or other regulatory authorities may require the delay or termination of such clinical trial, or require the conduct of one or more additional clinical trials to further demonstrate the safety of the therapeutic candidate.
For a more complete description of the safety profile for REBLOZYL and our therapeutic candidates, see the description of REBLOZYL and each of our therapeutic candidates in the "Business" section of this Annual Report on Form 10-K.
Our understanding of the relationship between REBLOZYL and our therapeutic candidates and these events may change as we gather more information, and additional unexpected adverse events may occur. There can be no assurance that additional adverse events associated with REBLOZYL or our therapeutic candidates will not be observed. As is typical in drug development, we have a program of ongoing toxicology studies in animals for our clinical stage therapeutic candidates and cannot provide assurance that the findings from such studies or any ongoing or future clinical trials will not adversely affect our clinical development activities.
Before obtaining regulatory approval for the sale of our therapeutic candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our therapeutic candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. In addition, we have never conducted a Phase 3 clinical trial for a therapeutic candidate without a partner and we may not be successful in doing so. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim or initial results of a clinical trial do not necessarily predict final results. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses, and successful achievement of study endpoints does not guarantee progression to further clinical development, receipt of regulatory approval or commercialization. Many companies that have believed their therapeutic candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain regulatory approval of their products. Even though REBLOZYL received regulatory approval for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions, there can be no assurance that REBLOZYL will perform satisfactorily in clinical trials in other indications, or that REBLOZYL will receive regulatory approval in such other indications.
We or our current or future partners may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our therapeutic candidates or REBLOZYL in new indications, including: 
regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;


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clinical trials of REBLOZYL or our therapeutic candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

the number of patients required for clinical trials of REBLOZYL or our therapeutic 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 at a higher rate than we anticipate;

third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

we might have to suspend or terminate clinical trials of REBLOZYL or our therapeutic candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

regulators, institutional review boards, or the data safety monitoring board for such trials 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;

the cost of clinical trials of REBLOZYL or our therapeutic candidates may be greater than we anticipate;

the supply or quality of REBLOZYL or our therapeutic candidates or other materials necessary to conduct clinical trials of our therapeutic candidates may be insufficient or inadequate; and

REBLOZYL or our therapeutic candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.

If we or our current or future partners are required to conduct additional clinical trials or other testing of REBLOZYL or our therapeutic candidates beyond those that we currently contemplate, if we or our current or future partners are unable to successfully complete clinical trials of REBLOZYL or our therapeutic candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if we or others identify undesirable side effects caused by REBLOZYL or our therapeutic candidates either before or after receipt of marketing approval, then a number of potentially significant negative consequences could result, including that we or our current or future partners may:

be delayed in obtaining or be unable to obtain marketing approval for our therapeutic candidates or REBLOZYL in new indications;

obtain approval for indications or patient populations that are not as broad as intended or desired;

be required to provide a medication guide outlining the risks of such side effects for distribution to patients;

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

suffer reputational harm;

be sued and held liable for harm caused to patients;

be subject to additional post-marketing testing requirements; or

have the product removed from the market after obtaining marketing approval.
Product development costs will also increase if we or our current or future partners experience delays in testing or marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our therapeutic candidates, could allow our competitors to bring products to market before we do, and could impair our ability to successfully commercialize our therapeutic candidates, any of which may harm our business and results of operations.

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Our results to date do not guarantee that any of our therapeutic candidates will be safe or effective, or receive regulatory approval.
The risk of failure of our current therapeutic candidates is high. Later clinical trials may not yield data consistent with earlier clinical trials. Similarly, clinical responses seen in patients enrolled at early stages of a clinical trial may not be replicated in patients enrolled in that trial at a later time. In addition, adverse events not observed in early clinical trials may be seen for the first time in later studies, or adverse events observed in a small number of patients in early trials may be seen in a greater number of patients in later studies and have greater statistical significance than previously anticipated. In the event that our clinical trials do not yield data consistent with earlier experience, it may be necessary for us to change our development strategy or abandon development of that therapeutic candidate, either of which could result in delays, additional costs and a decrease in our stock price.
The Phase 2 and Phase 3 clinical trial results for REBLOZYL are not necessarily indicative or predictive of the future results of BMS's ongoing and future Phase 2 or Phase 3 clinical trials. Even though the FDA approved REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions, it is impossible to predict when or if REBLOZYL will receive regulatory approval in new indications or when or if any of our therapeutic candidates will prove safe or effective in humans or receive regulatory approval. These therapeutic candidates may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies or early-to-mid-stage clinical trials, and they may interact with human biological systems or other drugs in unforeseen, ineffective or harmful ways. If REBLOZYL does not receive regulatory approval in new indications or if we are unable to discover or successfully develop drugs that are safe and effective in humans, we may not have a viable business.
We manufacture ACE-083 and our other unpartnered and preclinical therapeutic candidates at our manufacturing facility. If our manufacturing facility is damaged or destroyed or production at this facility is otherwise interrupted, our business and prospects would be negatively affected.
If the manufacturing facility at our corporate headquarters or the equipment in it is damaged or destroyed, or if production at this facility is otherwise interrupted, we may not be able to quickly or economically replace our manufacturing capacity or replace it at all. In the event of a temporary or protracted loss of this facility or equipment, we might not be able to transfer manufacturing to a third party. Even if we could transfer manufacturing to a third party, the shift would likely be expensive and time-consuming, particularly since the new facility would need to comply with the necessary regulatory requirements and we would need approval from the FDA and foreign regulators before administering any products manufactured at that facility to patients. Such an event could impair or render unusable patient data from then-ongoing clinical trials and/or delay our clinical trials, registration and launches. Any such issues may have a substantial negative effect on our business.
Our expanded research activities may not identify new therapeutic candidates, and we may not be successful in developing any new therapeutic candidates that are identified.
Discovery and development of new therapeutic candidates is an unpredictable activity. We may not succeed in identifying new therapeutic candidates, and if we are unable to do so, our pipeline of clinical stage therapeutic candidates will be reduced in size, potentially harming our business. Our discovery efforts are primarily focused on IntelliTrap™ therapeutic candidates and antibodies. We have limited experience manufacturing and developing antibodies and IntelliTrap™ proteins, and we may not be successful at doing so in the future. Manufacturing biologic therapeutic candidates is complex and often requires extensive process development to achieve suitable quality and quantity of drug substance for clinical development and commercialization, and we may not succeed in achieving the quality and quantity of drug substance that is required at any particular stage. We may be unable to manufacture these therapeutic candidates, these therapeutic candidates may show unacceptable toxicity or pharmacokinetic properties, or these therapeutic candidates may not be safe or effective in clinical trials.

Risks Related to Our Business and Industry
If we undertake business combinations, collaborations or similar strategic transactions, they may disrupt our business, divert management’s attention, dilute stockholder value or be difficult to integrate.
On a regular basis, we consider various business combination transactions, collaborations, license agreements and strategic transactions with third parties, including transactions which may result in us acquiring, or being acquired by, a third party. The consummation or performance of any future business combination, collaboration or strategic transaction may involve risks, such as:
diversion of managerial attention and resources from day-to-day operations;

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challenges associated with integrating acquired technologies and operations of acquired companies;

exposure to unforeseen liabilities or increased regulatory and compliance obligations;

difficulties in the assimilation of different cultures and practices, as well as in the assimilation and retention of broad and geographically dispersed personnel and operations;

misjudgment with respect to value, return on investment or strategic fit;

higher than expected transaction costs; and

additional dilution to our existing stockholders if we issue equity securities as consideration for any acquisitions.
As a result of these risks, we may not be able to achieve the expected benefits of any such transaction. Future business combinations could involve the acquisition of significant intangible assets. We may need to record write-downs from future impairments of identified intangible assets and goodwill. These accounting charges would increase a reported loss or reduce any future reported earnings. In addition, we could use substantial portions of our available cash to pay the purchase price for company or product candidate acquisitions. We could also incur debt or issue additional equity securities as consideration for these acquisitions, which could cause our stockholders to suffer significant dilution.
If we fail to attract and keep senior management and key personnel, we may be unable to successfully develop our therapeutic candidates, conduct our clinical trials and commercialize our therapeutic candidates.
We are highly dependent on members of our senior management. The loss or transition of services from any member of our senior management could impede the achievement of our research, development or commercialization objectives.
Recruiting and retaining qualified scientific, clinical, regulatory, manufacturing, sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. 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.
We may encounter difficulties in managing our organizational changes and successfully adjusting our operations.
As we seek to advance our therapeutic candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our therapeutic candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our therapeutic candidates.
We face an inherent risk of product liability as a result of the clinical testing of our therapeutic candidates and the sale of any products for which we obtain regulatory approval. For example, we may be sued if REBLOZYL or any other product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our therapeutic candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
injury to our reputation;
withdrawal of clinical trial participants;

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costs to defend the related litigations;
a diversion of management's time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals, or labeling, marketing or promotional restrictions;
loss of revenue;
the inability to commercialize our therapeutic candidates; and
a decline in our stock price.
Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We currently carry product liability insurance covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against companies following a decline in the market price of their securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
Comprehensive tax reform legislation could adversely affect our business and financial condition.
On December 22, 2017, tax legislation commonly known as the “Tax Cuts and Jobs Act” (TCJA) was enacted that 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, or NOLs, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Our net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate tax rate, and the impact of the reduction to our deferred tax assets and associated valuation allowance was recognized in 2017. We continue to examine the impact this tax reform legislation may have on our business. The impact of this tax reform remains uncertain and could be adverse.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2019, we had federal NOLs of approximately $666.3 million and state NOLs of approximately $689.8 million available to reduce future taxable income, if any. These federal and state NOL carryforwards generally expire at various times through 2039, however, under the TCJA, federal NOLs generated after December 31, 2017 will not be subject to expiration. 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 its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We have completed several financings since our inception which may have resulted in a change in control as defined by IRC Section 382. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. Further, the reduction of the corporate tax rate under the TCJA may reduce the potential economic benefit of our NOLS and any other deferred tax assets.

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We must comply with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.
We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage, handling, treatment and disposal of materials that we use in our manufacturing process. Although we believe our safety procedures for handling and disposing of these materials and waste products comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We are uninsured for third-party contamination injury.
Our relationships with healthcare providers, physicians and third-party payers are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payers play a primary role in the recommendation and prescription of our product, REBLOZYL, and will play a primary role for any therapeutic candidates for which we obtain regulatory approval. Our arrangements with healthcare providers, physicians and third-party payers 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 any medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
the federal Anti-Kickback Statute, or AKS, prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. Remuneration is not defined in the AKS and has been broadly interpreted to include anything of value, including for example, gifts, discounts, coupons, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value;
the federal False Claims Act and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $11,463 to $23,331 per false claim, which amounts are subject to periodic revision by the government;
federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
the federal Food, Drug and Cosmetic Act and its regulations, which prohibit, among other things, the introduction or delivery for introduction into interstate commerce of any drug that is adulterated or misbranded;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the Foreign Corrupt Practices Act, a U.S. law, which regulates certain financial relationships with foreign government officials (which could include, for example, certain medical professionals) and its foreign equivalents;
the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs to report payments and other transfers of value to physicians and teaching hospitals;
the national anti-bribery laws of European Union Member States, such as the U.K. Bribery Act 2010, or the Bribery Act, which prohibit the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products; and

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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
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 subject us to significant fines and penalties.
The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect our business, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, that govern the collection, use and disclosure of personal information. Although we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly obtain individually identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Other countries also have, or are developing, laws governing the collection, use and transmission of personal information. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation (GDPR), which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European activities.
Our internal computer systems, or those of our partners, third-party CROs or other third parties with which we contract may fail or suffer data breaches and cyber-attacks, which could compromise our intellectual property or other sensitive information and could result in a material disruption of our therapeutic candidate development programs and have a material adverse effect on our reputation, business, financial condition or results of operations.
In the ordinary course of our business, we collect, maintain and transmit sensitive data on our networks and systems and on the networks and systems of our partners, third-party CROs and other third parties with which we contract, including our intellectual property and proprietary or confidential business information (such as research data and employee personal information) and confidential information with respect to our vendors and our partners. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past few years, cyber-attacks have become more prevalent and much harder to detect and defend against.

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Our network and storage applications and those of our partners, third-party CROs and other third parties with which we contract may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. A data security breach could also lead to public exposure of personal information of our employees. Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources. Our network security and data recovery measures and those of our clinical research organizations, collaborators and vendors may not be adequate to protect against such security breaches and disruptions. These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business. While we have not experienced any such material security breaches or disruptions to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our or our partners' regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
The increasing use of social media platforms presents new risks and challenges.              
Social media is increasingly being used to communicate about our approved product, our clinical development programs and the diseases our therapeutic candidates are being developed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media channels to report an alleged adverse event. When such disclosures occur, there is a risk that we fail to monitor and comply with applicable adverse event reporting obligations, or we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what we may say about our therapeutic candidates. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social networking website, or a risk that a post on a social networking website by any of our employees may be construed as inappropriate promotion. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions, or incur other harm to our business.
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. A severe or prolonged economic downturn could result in a variety of risks to our business, including, weakened demand for our approved product or any of our therapeutic candidates and our ability to raise additional capital when needed on acceptable terms, if at all. Weak global economic conditions, especially in Europe, could decrease the number of clinical trial sites available to us and hinder our ability to conduct clinical trials, which would have a material adverse effect on our business and the development of our therapeutic candidates. 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. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Risks Related to Our Common Stock
The market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above the price at which you purchased them.
Since our initial public offering, the price of our common stock as reported on The Nasdaq Global Market has ranged from a low of $16.78 on November 6 and 8, 2013 to a high of $95.95 on February 11, 2020. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
results of, and the timing of the release of results of, our clinical trials, including those that are being conducted by BMS;

failure to obtain sufficient pricing and reimbursement for REBLOZYL or our therapeutic candidates, if approved, from private and governmental payers;

failure to obtain market acceptance and adoption of REBLOZYL or any other potential product following regulatory approval;

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results of clinical trials of our competitors' products;

regulatory actions with respect to our products or our competitors' products;

actual or anticipated fluctuations in our financial condition and operating results;

publication of research reports by securities analysts about us or our competitors or our industry;

our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;

additions and departures of key personnel;

strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

the passage of legislation or other regulatory developments affecting us or our industry;

fluctuations in the valuation of companies perceived by investors to be comparable to us;

sales of our common stock by us, our insiders or our other stockholders;

speculation in or expectations of the press or investment community, including with regard to our potential clinical trial results, royalty revenue or market opportunities;

announcement or expectation of additional financing efforts;

changes in accounting principles;

terrorist acts, acts of war or periods of widespread civil unrest;

natural disasters and other calamities;

actual or perceived changes in current or future market conditions for biopharmaceutical stocks; and

changes in general market and economic conditions.
In addition, the stock market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products, or to a lesser extent our markets. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
We do not expect to pay any cash dividends for the foreseeable future.
You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.

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Provisions in our restated certificate of incorporation, our amended and restated by-laws and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
Our restated certificate of incorporation, amended and restated by-laws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our restated certificate of incorporation and by-laws include provisions that:
authorize "blank check" preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

create a classified board of directors whose members serve staggered three-year terms;

specify that special meetings of our stockholders can be called only by our board of directors;

prohibit stockholder action by written consent;

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

provide that our directors may be removed only for cause;

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

specify that no stockholder is permitted to cumulate votes at any election of directors;

expressly authorize our board of directors to modify, alter or repeal our amended and restated by-laws; and

require supermajority votes of the holders of our common stock to amend specified provisions of our restated certificate of incorporation and amended and restated by-laws
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures and efforts by stockholders to change the direction or management of the company may be unsuccessful.
Any provision of our restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our restated certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware and federal court within the State of Delaware will be exclusive forums for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our restated certificate of incorporation or our amended and restated by-laws, or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our restated certificate of incorporation described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court

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were to find these provisions of our restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Sales of our common stock by our employees, including our executive officers, could cause our stock price to fall or prevent it from increasing for numerous reasons, and sales by such persons could be viewed negatively by other investors.
In accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, and our policies regarding stock transactions, a number of our employees, including executive officers, have adopted and may continue to adopt stock trading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directors require public filings. Sales of our common stock by such persons could cause the price of our common stock to fall or prevent it from increasing. If sales by employees, executive officers or directors cause a substantial number of shares of our common stock to become available for purchase in the public market, the price of our common stock could fall or may not increase. Also, sales by such persons could be viewed negatively by holders and potential purchasers of our common stock.
If securities analysts do not publish research or reports about our business or if they publish negative, or inaccurate, evaluations of our stock, the price of our stock and trading volume could decline.
The trading market for our common stock may be impacted, in part, by the research and reports that securities or industry analysts publish about us or our business. There can be no assurance that analysts will cover us, continue to cover us or provide favorable coverage. If one or more analysts downgrade our stock or change their opinion of our stock, our share price may decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

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Item 1B.    Unresolved Staff Comments
Not applicable.
Item 2.    Properties
Our corporate, research and development, manufacturing, and clinical trial operations are located in Cambridge, Massachusetts. We lease approximately 125,000 square feet of office and laboratory space in five adjacent buildings with aggregate monthly rent expense of approximately $0.7 million. Four of our leases expire in September 2023 and one lease expires in March 2021.
We believe our facilities are adequate for our current needs and that suitable additional substitute space would be available if needed.
Item 3.    Legal Proceedings
While we are not currently a party to any material legal proceedings, we could become subject to legal proceedings in the ordinary course of business. We do not expect any such potential items to have a significant impact on our financial position.
Item 4.    Mine Safety Disclosures
Not applicable.

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PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Stockholders
Our common stock has been listed on The Nasdaq Global Market under the symbol "XLRN" since September 19, 2013. Prior to that, there was no public market for our common stock. As of January 31, 2020, there were approximately 57 holders of record of our common stock.
Dividends
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any future determination to pay dividends will be made at the discretion of our board of directors.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.
Performance Graph
The following graph shows a comparison from December 31, 2014 through December 31, 2019 of cumulative total return on assumed investment of $100.00 in cash in our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. Such returns are based on historical results and are not intended to suggest future performance. Data for the Nasdaq Composite Index and the Nasdaq Biotechnology Index assume reinvestment of dividends.

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(1)(2)
Among Acceleron Pharma Inc., the Nasdaq Composite Index, and the Nasdaq Biotechnology Index

totalreturnchart2019.jpg
_______________________________________________________________________________
(1)
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any filing of Acceleron Pharma Inc. under the Securities Act of 1933, as amended.
(2)
$100 invested on December 31, 2014 in stock or index, including reinvestment of dividends.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
None.
Item 6.    Selected Financial Data
The information set forth below should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The selected financial data in this section is not intended to replace the consolidated financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
The selected consolidated statements 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 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We derived the selected consolidated financial data for the years ended December 31, 2016 and 2015 and as of December 31, 2017, 2016 and 2015 from audited financial statements which are not included in this Annual Report on Form 10-K.
Historical results are not necessarily indicative of the results to be expected in future periods.

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Year Ended December 31,
(in thousands, except per share data)
2019
 
2018
 
2017
 
2016
 
2015
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 

 
 

 
 

 
 
Collaboration revenue:
 
 
 

 
 

 
 

 
 
License and milestone
$
60,000

 
$

 
$
541

 
$
15,550

 
$
1,184

Cost-sharing, net
13,993

 
13,991

 
12,940

 
12,221

 
16,913

Total revenue
73,993

 
13,991

 
13,481

 
27,771

 
18,097

Costs and expenses:
 
 
 

 
 

 
 

 
 

Research and development
153,953

 
103,902

 
89,726

 
68,580

 
58,404

Selling, general and administrative
56,485

 
34,503

 
33,738

 
25,297

 
20,572

Total costs and expenses
210,438

 
138,405

 
123,464

 
93,877

 
78,976

Loss from operations
(136,445
)
 
(124,414
)
 
(109,983
)
 
(66,106
)
 
(60,879
)
Other income (expense) net
819

 
(52
)
 
(992
)
 
7,262

 
(3,527
)
Interest income
10,706

 
5,568

 
2,553

 
1,854

 
512

Total other income (expense), net
11,525

 
5,516

 
1,561

 
9,116

 
(3,015
)
Loss before income taxes
(124,920
)
 
(118,898
)
 
(108,422
)
 
(56,990
)
 
(63,894
)
Income tax benefit (provision)
62

 
27

 
(32
)
 
(24
)
 

Net loss
$
(124,858
)
 
$
(118,871
)
 
$
(108,454
)
 
$
(57,014
)
 
$
(63,894
)
 
 
 
 
 
 
 
 
 
 
Net loss per share applicable to common stockholders-basic and diluted(1)
$
(2.38
)
 
$
(2.59
)
 
$
(2.68
)
 
$
(1.52
)
 
$
(1.92
)
 
 
 
 
 
 

 
 

 
 

Weighted-average number of common shares used in computing net loss per share applicable to common stockholders-basic and diluted
52,453

 
45,898

 
40,420

 
37,430

 
33,303


 
As of December 31,
(in thousands)
2019
 
2018
 
2017
 
2016
 
2015
Consolidated Balance Sheet Data:
 
 
 

 
 

 
 

 
 
Cash and cash equivalents
$
237,677

 
$
144,052

 
$
100,150

 
$
20,950

 
$
27,783

Short and long-term investments
216,169

 
147,260

 
272,800

 
213,432

 
108,198

Operating lease - right of use asset, net
23,908

 

 

 

 

Total assets
504,906

 
314,821

 
389,177

 
247,647

 
146,337

Operating lease liability - right of use
6,183

 

 

 

 

Total current liabilities
33,373

 
18,912

 
16,745

 
16,149

 
14,491

Operating lease liability - right of use, net of current portion
20,201

 

 

 

 

Warrants to purchase common stock
1,856

 
1,491

 
2,236

 
1,244

 
17,187

Total stockholder's equity
449,476

 
292,037

 
365,217

 
225,597

 
109,263

_______________________________________________________________________________

(1)
See Note 2 within the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of the method used to calculate basic and diluted net loss per common share.


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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements included in Item 15 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under "Risk Factors" and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements. Please also refer to the section under heading "Forward-Looking Statements."
Overview
We are a biopharmaceutical company dedicated to the discovery, development and commercialization of therapeutics to treat serious and rare diseases. Our research focuses on key natural regulators of cellular growth and repair, particularly the Transforming Growth Factor-Beta, or TGF-beta, protein superfamily. By combining our discovery and development expertise, including our proprietary knowledge of the TGF-beta superfamily, and our internal protein engineering and manufacturing capabilities, we have generated several innovative therapeutic candidates, all of which encompass novel potential first-in-class mechanisms of action. If successful, these candidates could have the potential to significantly improve clinical outcomes for patients across these areas of high, unmet need.
We have focused and prioritized our research and development activities within three key therapeutic areas: hematology, pulmonary and neuromuscular.
Hematology
In November 2019, the U.S. Food and Drug Administration, or FDA, approved our first commercial product, REBLOZYL® (luspatercept-aamt) for the treatment of anemia in adult patients with beta-thalassemia who require regular red blood cell, or RBC, transfusions. REBLOZYL is partnered with Bristol-Myers Squibb Company, or BMS (which acquired Celgene Corporation in November 2019), and is a first-in-class erythroid maturation agent designed to promote RBC production through a novel mechanism. The approval of REBLOZYL is based on the positive results from the Phase 3 BELIEVE trial evaluating the safety and efficacy of REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions.
In addition to its approved indication, luspatercept-aamt is being developed to treat anemia in patients with myelodysplastic syndromes, or MDS, non-transfusion dependent beta-thalassemia, and myelofibrosis. We and BMS previously announced positive results for the Phase 3 MEDALIST trial evaluating the safety and efficacy of luspatercept-aamt for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. Based on these results, BMS submitted a supplemental Biologics License Application, or sBLA, in the United States for luspatercept-aamt for the treatment of anemia in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. The FDA accepted the sBLA and set a target action date of April 4, 2020. BMS also submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, in the BELIEVE and MEDALIST indications. The MAA has been successfully validated and we expect the EMA to issue a decision in the second half of 2020.
BMS is currently conducting a Phase 2 clinical trial with luspatercept-aamt in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, with preliminary topline results currently expected by the end of 2020, and a Phase 3 clinical trial, the COMMANDS trial, in first-line, lower-risk MDS patients. In myelofibrosis, BMS is conducting a Phase 2 clinical trial in patients with myelofibrosis-associated anemia, and initial results from this trial were presented in December 2019 at the 61st American Society of Hematology Annual Meeting and Exposition showing that luspatercept-aamt improved anemia in patients receiving and not receiving RBC transfusions, with more profound effects in patients treated with ruxolitinib, a small molecule JAK inhibitor. Based on these data, we and BMS announced plans to initiate by the end of 2020 the Phase 3 INDEPENDENCE study in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions.
If approved in the United States and Europe, we believe that there is an annual peak sales opportunity for REBLOZYL in excess of $2 billion in lower-risk MDS and beta-thalassemia, and upon successful development and approval in the United States and Europe, an additional $1 billion in myelofibrosis and other future development opportunities. We and BMS are evaluating luspatercept-aamt for the treatment of anemia in potential new indications that could provide additional sales opportunities.
BMS is responsible for paying 100% of the development costs for all clinical trials for luspatercept-aamt. We may receive a maximum of $125.0 million for remaining potential regulatory and commercial milestone payments. We have a co-promotion

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right in North America and our commercialization costs provided in the commercialization plan and budget approved by the Joint Commercialization Committee, or JCC, are entirely funded by BMS. Activities that we elect to conduct outside of the approved development or commercialization budgets to support REBLOZYL are at our own expense. We are eligible to receive tiered royalty payments from BMS on net sales of REBLOZYL in the low-to-mid 20% range.
Pulmonary
We are actively developing our lead pulmonary program, sotatercept, for the treatment of patients with pulmonary arterial hypertension, or PAH. Sotatercept is generally partnered with BMS, but we retain the exclusive rights to fund, develop, and lead the global commercialization of sotatercept in pulmonary hypertension, which we refer to as the PH field, and that includes PAH. PAH is a rare and chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in the pulmonary arteries.
In January 2020, we announced that the PULSAR Phase 2 clinical trial of sotatercept for the treatment of patients with PAH met its primary and key secondary endpoints, as well as other secondary endpoints. The 18-month extension period of the PULSAR trial is ongoing. We are also currently enrolling an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH, with preliminary results expected in 2020.
If sotatercept is commercialized to treat PAH and we recognize such revenue, then we will owe BMS a royalty in the low 20% range on global net sales. In certain circumstances, BMS may recognize revenue related to the commercialization of sotatercept in PAH, and in this scenario we will be eligible to receive a royalty from BMS such that the economic position of the parties is equivalent to the scenario in which we recognize such revenue.
Neuromuscular
We are independently developing our wholly-owned neuromuscular candidate, ACE-083. ACE-083 is designed for the treatment of focal muscle disorders. We are currently conducting a Phase 2 clinical trial with ACE-083 in patients with Charcot-Marie-Tooth disease, or CMT, and an extension study for eligible CMT patients who have completed treatment in the Phase 2 clinical trial with ACE-083. We previously announced results from part 1 of this Phase 2 clinical trial showing increases in mean total and contractile muscle volume, and reductions in fat fraction. The results also showed that ACE-083 was generally well tolerated. Enrollment is complete in part 2 of this trial and we expect to announce topline results from part 2 in the first quarter of 2020. In September 2019, we announced that ACE-083 did not achieve functional secondary endpoints in part 2 of a Phase 2 clinical trial in patients with facioscapulohumeral muscular dystrophy, or FSHD, and we are discontinuing development of ACE-083 in FSHD.
Funding and Expense
As of December 31, 2019, our operations have been funded primarily by $105.1 million in equity investments from venture investors, $773.8 million from public investors, $154.1 million in equity investments from our collaboration partners and $356.7 million in upfront payments, milestones, and net research and development payments from our collaboration partners. We estimate that we have spent approximately $154.0 million, $103.9 million, and $89.7 million, on research and development for the years ended December 31, 2019, 2018, and 2017, respectively.
We expect to continue to incur significant expenses and increasing operating losses over at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:
conduct clinical trials for sotatercept in the PH field, ACE-083 or any future therapeutic candidates;
continue our preclinical studies and potential clinical development efforts of our existing preclinical therapeutic candidates;
continue research activities for the discovery of new therapeutic candidates;
manufacture therapeutic candidates for our preclinical studies and clinical trials, and potentially for commercialization;
establish and maintain a sales, marketing and distribution infrastructure to commercialize any products for which we have or may obtain regulatory approval;
acquire or in-license other therapeutic candidates and patents;
seek regulatory approval for our therapeutic candidates; and
attract and retain skilled personnel.

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If we obtain regulatory approval for ACE-083, sotatercept in the PH field, or any future therapeutic candidate, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such costs are not paid by future partners. We will seek to fund our operations through the sale of equity, debt financings or other sources, including potential additional collaborations. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our therapeutic candidates.
To date, we have only generated limited revenue from royalties on the sale of our first and only commercial product, REBLOZYL, since receiving regulatory approval from the FDA in November 2019 for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions. Our ability to generate product revenue and become profitable depends upon our and our partners' ability to successfully commercialize products. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our therapeutic candidates and potentially begin to commercialize any approved products. For a description of the numerous risks and uncertainties associated with product development, see "Risk Factors".
Financial Operations Overview
Revenue
Collaboration Revenue
We have generated limited revenue from royalties on the sale of products. Our revenue to date has been predominantly derived from collaboration revenue, which includes license and milestone revenues and cost-sharing revenue, generated through collaboration and license agreements with partners for the development and commercialization of our therapeutic candidates. Cost-sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and co-promotion activities, under our collaboration agreements. Cost-sharing revenue is recognized in the period that the related activities are performed.
Costs and Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs directly incurred by us for the development of our therapeutic candidates, which include:
direct employee-related expenses, including salaries, benefits, travel and stock-based compensation expense of our research and development personnel;
expenses incurred under agreements with clinical research organizations, or CROs, and investigative sites that will conduct our clinical trials;
the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes;
allocated facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other supplies;
expenses associated with obtaining and maintaining patents; and
costs associated with preclinical activities and regulatory compliance.
Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.
We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our therapeutic candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our therapeutic candidates for which we or any partner obtain regulatory approval. We or our partners may never succeed in achieving regulatory approval for any of our therapeutic candidates beyond the initial approval of REBLOZYL. The duration, costs and timing of clinical trials and development of therapeutic candidates will depend on a variety of factors, including:
the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

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future clinical trial results;
potential changes in government regulation; and
the timing and receipt of any regulatory approvals.
A change in the outcome of any of these variables with respect to the development of a therapeutic candidate could mean a significant change in the costs and timing associated with the development of that therapeutic candidate. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of the clinical development of therapeutic candidates, or if we experience significant delays in the enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
From inception through December 31, 2019, we have incurred $812.7 million in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue the development of our TGF-beta platform therapeutic candidates, the discovery and development of preclinical therapeutic candidates, and the development of our clinical programs. Research and development expenses associated with REBLOZYL, and outside of the PH field, sotatercept, are generally reimbursed 100% by BMS. These reimbursements are recorded as revenue. We are expensing the costs of a Phase 1 clinical trial for ACE-2494, and Phase 2 clinical trials for REBLOZYL, sotatercept, and ACE-083, of which the REBLOZYL clinical trials are reimbursed by BMS. Our Phase 1 clinical trial for ACE-2494 and our Phase 2 clinical trial for ACE-083 in patients with FSHD are being discontinued. With respect to the REBLOZYL clinical trials directly conducted by BMS, we do not incur and are not reimbursed for expenses related to these development activities.
We manage certain activities such as clinical trial operations, manufacture of therapeutic candidates, and preclinical animal toxicology studies through third-party CROs. The only costs we track by each therapeutic candidate are external costs such as services provided to us by CROs, manufacturing of preclinical and clinical drug product, and other outsourced research and development expenses. We do not assign or allocate to individual development programs internal costs such as salaries and benefits, facilities costs, lab supplies and the costs of preclinical research and studies, except for REBLOZYL costs for the purposes of billing BMS. Our external research and development expenses during the years ended December 31, 2019, 2018 and 2017, were as follows:
 
Year ended December 31,
(in thousands)
2019
 
2018
 
2017
REBLOZYL(1)
$
4,387

 
$
6,518

 
$
6,616

Sotatercept(2)
19,027

 
8,633

 
495

Dalantercept(3)

 

 
4,718

ACE-083(4)
27,958

 
11,778

 
9,797

ACE-2494(5)
1,509

 
2,157

 
4,382

ACE-1334
5,282

 
2,064

 

Total direct research and development expenses
58,163

 
31,150

 
26,008

Other expenses(6)
95,790

 
72,752

 
63,718

Total research and development expenses
$
153,953

 
$
103,902

 
$
89,726

___________________________________________

(1)
These expenses associated with REBLOZYL are reimbursed 100% by BMS.

(2)
These expenses are associated with our development of sotatercept in PAH.

(3)
Development of dalantercept has been discontinued.

(4)
Development of ACE-083 in FSHD is being discontinued. We expect to incur all remaining material expense in connection with development in FSHD by the second quarter of 2020.

(5)
Development of ACE-2494 has been discontinued. All remaining material expense was incurred as of the end of 2019.

(6)
Other expenses include employee and unallocated contractor-related expenses, facility expenses, lab supplies and miscellaneous expenses.

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Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our employees in executive, commercial, operational, finance and human resource functions and other selling, general and administrative expenses including directors' fees and professional fees for accounting and legal services.
We continue to incur expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance premiums, and investor relations costs associated with being a public company. We anticipate that our selling, general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our therapeutic candidates. Additionally, if and when we believe regulatory approval of a therapeutic candidate appears likely, to the extent that we are undertaking commercialization of such therapeutic candidate ourselves, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operation.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income earned on cash, cash equivalents and investments.

Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and accrued clinical expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
Effective January 1, 2018, we adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (ASC 606), using the modified retrospective transition method. Under this method, results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605.

We have primarily generated revenue through collaboration, license and research arrangements, which are within the scope of ASC 606, with collaboration partners for the development and commercialization of therapeutic candidates. The arrangements generally contain performance obligations, which may include (1) licenses, or options to obtain licenses, to our technology, (2) research and development activities performed for the collaboration partners, (3) participation on joint development committees (JDCs), and (4) the manufacturing of clinical or preclinical material. Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon achieving significant development events, research and development reimbursements, sales milestones, exercises of options, and royalties on future product sales.

To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with the 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 the entity 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, we assess the goods or services promised within each contract, determines those that are performance obligations, and assesses 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. Depending on the nature of the performance obligation these

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assessments require management to make significant judgments and estimates. For additional information about our revenue recognition policy, see Note 10 to the financial statements in this Annual Report on Form 10-K.

Milestone Payments

At the inception of each arrangement that includes 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. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone in making this assessment. 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 or our licensee's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts the 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. If a milestone or other variable consideration relates specifically to our efforts to satisfy a single performance obligation or to a specific outcome from satisfying the performance obligation, we generally allocate the milestone amount entirely to that performance obligation.

The next likely regulatory milestone payments for REBLOZYL would be $25.0 million, which would result from EMA approval of a BLA or equivalent for luspatercept-aamt in either MDS or beta-thalassemia. We and BMS expect the EMA to issue a regulatory decision in the second half of 2020 for luspatercept-aamt. In accordance with our accounting policy regarding revenue recognition as described in Note 2, the revenue associated with this milestone will be recognized once it is probable that the application is approved by the regulatory authority. Milestone payments that are not within our control or the control of the licensee are not considered probable of being achieved until those approvals are received. The approval of this application is not within our control or BMS's control, and therefore, as of December 31, 2019, we cannot determine if it is probable that the regulatory agency will approve the application.
Accrued and Prepaid Clinical Trial Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued and prepaid expenses. This process involves reviewing 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 costs:
CROs and investigative sites in connection with clinical studies;
vendors in connection with preclinical development activities; and
vendors related to product manufacturing, development and distribution of clinical supplies.
We base our expenses related to CROs and third-party service providers on our estimates of the services provided and efforts expended pursuant to quotes and contracts with CROs and third parties that conduct research and development on our behalf, as well as discussion with internal personnel and external service providers as to the progress of the services and the agreed-upon fee to be paid for such services. 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 expense. Additionally, invoicing from third-party service providers may not coincide with actual work performed and can result in a prepaid position at period end. We make significant judgments and estimates in determining the services incurred as of each balance sheet date, which may result in either an accrual or prepaid balance. As actual costs become known, we adjust our estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed, the number of subjects enrolled, and the rate of enrollment may vary from its estimates and could result in us reporting amounts that are too high or too low in a particular period. Our accrued and prepaid expenses are dependent, in part, upon the receipt of timely and accurate reporting from CROs and third-party service providers. To date, we have not experienced any material differences between estimated costs and actual costs incurred.
Stock-Based Compensation
We account for our stock-based awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718, which requires all stock-based payments to employees, including grants of employee stock options, modifications to existing stock options, and restricted stock unit awards, to be recognized in the statements of operations and comprehensive income (loss) based on their fair values. We recognize the compensation cost of awards subject to service-based vesting conditions over the requisite service period, which is generally equal to the vesting term. For awards subject to both

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performance and service-based vesting conditions, we recognize compensation cost using an accelerated recognition method when it is probable that the performance condition will be achieved. If achievement of the performance condition is not probable, but the award will vest based on the service condition, we recognize the expense over the requisite service period. Forfeitures are recognized as they occur.
We estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including (1) the expected volatility of our stock, (2) the expected term of the award, (3) the risk-free interest rate and (4) expected dividends. We have estimated our volatility by using a blend of our stock price history, for the length of time we have market data for our stock and the historical volatility of similar public companies for the expected term of each grant. Due to the lack of a public market for our common stock prior to the completion of our initial public offering in September 2013, and resulting lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar publicly traded companies. For these analyses, we have selected companies with characteristics that we believe are comparable 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 as the calculated expected term of our stock-based awards. As of September 2019, we had sufficient company-specific historical volatility data to begin estimating our stock's expected volatility by using our own stock's data rather than a blended rate for most awards. We have estimated the expected life of our employee stock options using the "simplified" method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted.
Stock-based compensation totaled approximately $23.0 million, $24.6 million and $28.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. We expect the impact of our stock-based compensation expense for stock-based awards granted to employees and non-employees to grow in future periods due to the potential increases in the value of our common stock and headcount.
Results of Operations
Comparison of the Years Ended December 31, 2019 and 2018
 
Year Ended
December 31,
 
 
 
Increase
(Decrease)
(in thousands)
2019
 
2018
 
Revenue:
 

 
 

 
 

Collaboration revenue:
 

 
 

 
 

License and milestone
$
60,000

 
$

 
$
60,000

Cost-sharing, net
13,993

 
13,991

 
2

Total revenue (all amounts are with a related party)
73,993

 
13,991

 
60,002

Costs and expenses:
 
 
 
 
 
Research and development
153,953

 
103,902

 
50,051

Selling, general and administrative
56,485

 
34,503

 
21,982

Total costs and expenses
210,438

 
138,405

 
72,033

Loss from operations
(136,445
)
 
(124,414
)
 
(12,031
)
Other income (expense) net
819

 
(52
)
 
871

Interest income
10,706

 
5,568

 
5,138

Other income, net
11,525

 
5,516

 
6,009

Loss before income taxes
(124,920
)
 
(118,898
)
 
(6,022
)
Income tax benefit
62

 
27

 
35

Net loss
$
(124,858
)
 
$
(118,871
)
 
$
(5,987
)

Revenue.    We recognized revenue of $74.0 million in the year ended December 31, 2019, compared to $14.0 million in the year ended December 31, 2018. All of the revenue in both periods was derived from the BMS agreements. This increase in revenue of $60.0 million was primarily due to the recognition of milestones from BMS (then Celgene) for the acceptance of the BLA and validation of the MAA for REBLOZYL, as well as the approval of the BLA for REBLOZYL.

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Research and Development Expenses.    Research and development expenses were $154.0 million in the year ended December 31, 2019, compared to $103.9 million in the year ended December 31, 2018. This $50.1 million increase is primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:
an increase in personnel and facilities-related expense of $6.0 million related to increased headcount to support our growth;
an increase in external clinical trial expense of $8.7 million related to our ongoing clinical trials;
an increase in toxicology expense of $6.7 million related to the advancement of our clinical and preclinical programs;
an increase in contract manufacturing and drug supply expense of $11.1 million related to our ongoing clinical and preclinical programs;
an increase in in-licensing expense related to payments that were made in connection with achievements of milestones in 2019 totaling $3.6 million;
an increase of $10.0 million in relation to the execution of the license and collaboration agreement with Fulcrum Therapeutics, as discussed further in Note 10 to the financial statements in this Annual Report on Form 10-K; and
an increase in miscellaneous research expense and professional fees of $4.0 million.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses were $56.5 million in the year ended December 31, 2019, compared to $34.5 million in the year ended December 31, 2018. This $22.0 million increase was primarily due to the following factors:
an increase in selling expense of $5.1 million in preparation for the launch of REBLOZYL, our first commercial product approved by the FDA on November 8, 2019;
an increase in personnel and facilities-related expense of $12.7 million related to increased headcount to support our growth; and
an increase of $4.2 million in professional fees for legal, consulting, and accounting services.
Other Income, Net.    Other income, net was $11.5 million in the year ended December 31, 2019, compared to $5.5 million in the year ended December 31, 2018. This $6.0 million increase was primarily due to a $5.1 million increase in the interest earned on our investment portfolio as a result of our higher balance of interest-bearing cash equivalents and short- and long-term investments and a $1.3 million increase in the income associated with our sublease, offset by a $0.4 million decrease in the gain associated with marking the common warrant liability to market.
Income Tax Benefit.    Income tax benefit is attributable to the realization of current year benefits that offset unrealized gains, recognized in other comprehensive income, from our investment portfolio, offset slightly by state tax expense.
Comparison of the Years Ended December 31, 2018 and 2017

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Year Ended
December 31,
 
 
 
Increase
(Decrease)
(in thousands)
2018
 
2017
 
Revenue:
 

 
 

 
 

Collaboration revenue:
 

 
 

 
 

License and milestone
$

 
$
541

 
$
(541
)
Cost-sharing, net
13,991

 
12,940

 
1,051

Total revenue (all amounts are with a related party)
13,991

 
13,481

 
510

Costs and expenses:
 
 
 

 
 
Research and development
103,902

 
89,726

 
14,176

Selling, general and administrative
34,503

 
33,738

 
765

Total costs and expenses
138,405

 
123,464

 
14,941

Loss from operations
(124,414
)
 
(109,983
)
 
(14,431
)
Other income, net
5,516

 
1,561

 
3,955

Loss before income taxes
(118,898
)
 
(108,422
)
 
(10,476
)
Income tax benefit (provision)
27

 
(32
)
 
59

Net loss
$
(118,871
)
 
$
(108,454
)
 
$
(10,417
)

Revenue.    We recognized revenue of $14.0 million in the year ended December 31, 2018, compared to $13.5 million in year ended December 31, 2017. All of the revenue in both periods was derived from the BMS agreements. Significant factors resulting in this $0.5 million increase include:

an increase in cost-sharing revenue of $1.1 million primarily due to an increase in external expenses in preparation for the commercial launch of REBLOZYL; offset by

a decrease in license and milestone revenue of $0.6 million resulting from the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (ASC 606), the impact of which is discussed further in Note 2 to the financial statements in this Annual Report on Form 10-K.
Research and Development Expenses.    Research and development expenses were $103.9 million in the year ended December 31, 2018, compared to $89.7 million in the year ended December 31, 2017. This $14.2 million increase was primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:
an increase in personnel expenses totaling $7.3 million;
an increase in external clinical trial expenses of $8.6 million related to our sotatercept and ACE-083 Phase 2 clinical trials;
an increase in facility expenses of $1.9 million; offset by
a decrease in toxicology expenses of $4.5 million as compared to the same period in 2017.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses were $34.5 million in the year ended December 31, 2018, compared to $33.7 million in the year ended December 31, 2017. The $0.8 million increase was primarily due to an increase in personnel expenses of $0.7 million related to increased headcount to support our growth.
Other Income, Net.    Other income, net was $5.5 million in the year ended December 31, 2018, compared to $1.6 million in the year ended December 31, 2017. This $3.9 million increase was primarily due to a $3.0 million increase in the interest income earned on our investment portfolio as a result of our higher balance of interest-bearing cash equivalents and short- and long-term investments.
Income Tax Provision.    Income tax provision is attributable to the realization of our current year losses that offset unrealized gains, recognized in other comprehensive income, from our investment portfolio.
Liquidity and Capital Resources
We have incurred losses and cumulative negative cash flows from operations since our inception in June 2003, and as of December 31, 2019, we had an accumulated deficit of $711.4 million. We anticipate that we will continue to incur losses for at

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least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of the sale of equity, debt financings or other sources, including potential additional collaborations.
As of December 31, 2019, our operations have been primarily funded by $105.1 million in equity investments from venture investors prior to our IPO, $773.8 million from public investors, $154.1 million in equity investments from our partners and $356.7 million in upfront payments, milestones, and net research and development payments from our collaboration partners.
As of December 31, 2019, we had $453.8 million in cash, cash equivalents and investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the years set forth below:
 
Year Ended December 31,
(in thousands)
2019
 
2018
 
2017
Net cash (used in) provided by:
 
 
 


 

Operating activities
$
(93,804
)
 
$
(94,706
)

$
(76,544
)
Investing activities
(71,291
)
 
122,927


(64,366
)
Financing activities
258,720

 
16,146


220,296

Net increase in cash, cash equivalents and restricted cash
$
93,625

 
$
44,367


$
79,386

Operating Activities.    
Net cash used in operating activities was $93.8 million for the year ended December 31, 2019, compared to $94.7 million and $76.5 million for the years ended December 31, 2018 and 2017, respectively. Net cash used in operating activities has decreased over this three-year period as a result of $60.0 million of milestone payments received in 2019, offset by increased operating expenses over the same period. The increase in operating expenses consists of increased expenses related to headcount and facilities, increased external expenses for clinical and preclinical activities, contract manufacturing, consulting, and other external expenses to support our wholly-owned therapeutic programs, as well as expenses for commercial activities in advance of and in conjunction with the commercial launch of REBLOZYL. The change in net cash used in operating activities primarily consists of our net losses adjusted for non-cash items and changes in components of operating assets and liabilities as follows:
for the year ended December 31, 2019, a net loss of $124.9 million adjusted for non-cash items including: stock-based compensation expense of $23.0 million and depreciation and amortization expense of $3.9 million, and a net increase of $4.0 million due to changes in operating assets and liabilities. The significant items in the change in operating assets and liabilities include an increase in accrued expenses of  $6.3 million and an increase in collaboration receivable of $1.5 million.
for the year ended December 31, 2018, a net loss of $118.9 million adjusted for non-cash items including: stock-based compensation expense of $24.6 million, depreciation and amortization expense of $3.7 million, and a net decrease of $4.6 million due to changes in operating assets and liabilities. The significant items in the change in operating assets and liabilities include an increase in prepaid expenses of $3.0 million primarily for start-up activities for the PULSAR clinical trial, and an increase in colla