Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

0001193125-16-675231.txt : 20160808 0001193125-16-675231.hdr.sgml : 20160808 20160808164404 ACCESSION NUMBER: 0001193125-16-675231 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20160808 DATE AS OF CHANGE: 20160808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGIOS PHARMACEUTICALS INC CENTRAL INDEX KEY: 0001439222 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36014 FILM NUMBER: 161814717 BUSINESS ADDRESS: STREET 1: 38 SIDNEY STREET STREET 2: 2ND FLOOR CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 617-272-5275 MAIL ADDRESS: STREET 1: 38 SIDNEY STREET STREET 2: 2ND FLOOR CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 d85594d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-36014

AGIOS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		26-0662915
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

88 Sidney Street, Cambridge, Massachusetts		02139
(Address of Principal Executive Offices)		(Zip Code)

(617) 649-8600

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on August 5, 2016: 38,046,368

AGIOS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015		1

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015		2

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2016 and 2015		3

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015		4

	Notes to Condensed Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35

Item 4.	Controls and Procedures		35

PART II. OTHER INFORMATION

Item 1A.	Risk Factors		36

Item 6.	Exhibits		61

	Signatures		62

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited).

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	June 30, 2016			December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	234,048		$	71,764
Marketable securities		231,321			245,238
Collaboration receivable – related party		7,853			8,225
Tenant improvement and other receivables		2,014			3,374
Prepaid expenses and other current assets		8,923			8,728

Total current assets		484,159			337,329
Marketable securities		46,926			58,905
Property and equipment, net		25,134			23,220
Other assets		1,382			611

Total assets	$	557,601		$	420,065

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,448		$	14,748
Accrued expenses		14,414			15,996
Deferred revenue – related party		31,469			19,665
Deferred rent		2,933			2,479

Total current liabilities		67,264			52,888

Deferred revenue, net of current portion – related party		183,540			4,699
Deferred rent, net of current portion		17,719			17,360
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2016 and December 31, 2015		—			—
Common stock, $0.001 par value; 125,000,000 shares authorized; 38,029,510 and 37,696,502 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		38			38
Additional paid-in capital		652,574			630,078
Accumulated other comprehensive income (loss)		297			(318	)
Accumulated deficit		(363,831	)		(284,680	)

Total stockholders’ equity		289,078			345,118

Total liabilities and stockholders’ equity	$	557,601		$	420,065

See accompanying notes to condensed consolidated financial statements.

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Collaboration revenue – related party	$	6,978		$	13,219		$	38,259		$	47,421
Operating expenses:
Research and development (net of $5,922 and $4,546 of cost reimbursement from related party for the three months ended June 30, 2016 and 2015, respectively, and $14,716 and $8,912 for the six months ended June 30, 2016 and 2015, respectively)		50,804			36,423			94,842			68,866
General and administrative		12,644			8,929			23,481			15,883

Total operating expenses		63,448			45,352			118,323			84,749

Loss from operations		(56,470	)		(32,133	)		(80,064	)		(37,328	)
Interest income		517			236			913			474

Net loss	$	(55,953	)	$	(31,897	)	$	(79,151	)	$	(36,854	)

Net loss per share – basic and diluted	$	(1.47	)	$	(0.85	)	$	(2.09	)	$	(0.99	)

Weighted-average number of common shares used in net loss per share – basic and diluted		37,956,383			37,329,220			37,910,233			37,272,300

See accompanying notes to condensed consolidated financial statements.

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net loss	$	(55,953	)	$	(31,897	)	$	(79,151	)	$	(36,854	)
Other comprehensive income:
Unrealized gain on available-for-sale securities		208			31			615			279

Comprehensive loss	$	(55,745	)	$	(31,866	)	$	(78,536	)	$	(36,575	)

See accompanying notes to condensed consolidated financial statements.

AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2016			2015
Operating activities
Net loss	$	(79,151	)	$	(36,854	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,550			1,150
Stock-based compensation expense		20,103			13,237
Net amortization of premium and discounts on investments		330			319
Changes in operating assets and liabilities:
Collaboration receivable – related party		372			(3,982	)
Tenant improvement and other receivables		1,360			(2,948	)
Prepaid expenses and other assets		(1,129	)		125
Accounts payable		3,755			(1,210	)
Accrued expenses and other liabilities		(833	)		(2,558	)
Deferred rent		813			13,689
Refundable income taxes and income taxes payable		—			3,841
Deferred revenue – related party		190,645			(6,414	)

Net cash provided by (used in) operating activities		138,815			(21,605	)

Investing activities
Purchases of marketable securities		(226,289	)		(106,205	)
Proceeds from maturities and sales of marketable securities		252,468			198,078
Purchases of property and equipment		(5,267	)		(14,679	)

Net cash provided by investing activities		20,912			77,194

Financing activities
Payment of public offering costs		—			(207	)
Net proceeds from stock option exercises and employee stock purchase plan		2,557			3,120

Net cash provided by financing activities		2,557			2,913

Net increase in cash and cash equivalents		162,284			58,502
Cash and cash equivalents at beginning of the period		71,764			14,031

Cash and cash equivalents at end of the period	$	234,048		$	72,533

Supplemental disclosure of non-cash investing and financing transactions
Additions to property, plant and equipment in accounts payable and accrued expenses	$	1,360		$	1,531

Vesting of restricted stock	$	—		$	(4	)

Proceeds from stock option exercises in other current assets	$	23		$	3

See accompanying notes to condensed consolidated financial statements.

Agios Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Overview and Basis of Presentation

Overview

Agios Pharmaceuticals, Inc. (“Agios” or the “Company”) is a biopharmaceutical company committed to the fundamental transformation of patients’ lives through scientific leadership in the field of cancer and rare genetic metabolic disorders. The Company has built a unique set of core capabilities in the field of cellular metabolism, with the goal of making transformative, first or best in class medicines. Agios’ therapeutic areas of focus are cancer and rare genetic metabolic disorders, which are a broad group of more than 600 rare genetic diseases caused by mutations, or defects, of single metabolic genes. In both of these areas, the Company is seeking to unlock the biology of cellular metabolism to create transformative therapies. The Company is located in Cambridge, Massachusetts.

Basis of presentation

The condensed consolidated interim balance sheet as of June 30, 2016, the condensed consolidated interim statements of operations and comprehensive loss for the three and six months ended June 30, 2016 and 2015 and cash flows for the six months ended June 30, 2016 and 2015, are unaudited. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s condensed consolidated financial position as of June 30, 2016, its results of operations for the three and six months ended June 30, 2016 and June 30, 2015 and cash flows for the six months ended June 30, 2016 and 2015. The financial data and the other financial information disclosed in these notes to the condensed consolidated interim financial statements related to the three-month and six-month periods are also unaudited. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any other future annual or interim period. The condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 that was filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2016.

The Company’s consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly owned subsidiaries, Agios Securities Corporation and Agios International Sarl. All intercompany transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Significant accounting policies

There have been no material changes to the significant accounting policies previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2015.

Recent accounting pronouncements

In May 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, discussed below. ASU 2016-12 has the same effective date as the new revenue standard, ASU 2014-09, (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. The Company is currently in the process of evaluating the impact of the guidance on its consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies identifying performance obligation and licensing implementation guidance and illustrations in the ASU 2014-09, discussed below. ASU 2016-10 has the same effective date as the new revenue standard, ASU 2014-09, (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. The Company is currently in the process of evaluating the impact of the guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions, including income taxes consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The Company is currently in the process of evaluating the impact of the guidance on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), which amends the principal-versus-agent implementation guidance and illustrations in the ASU 2014-09, discussed below. ASU 2016-08 has the same effective date as the new revenue standard, ASU 2014-09, (as amended by the one-year deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same transition method they used to adopt the new revenue standard. The Company is currently in the process of evaluating the impact of the guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which establishes principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted. The Company is currently in the process of evaluating the impact of the guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40). The ASU requires all entities to evaluate for the existence of conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the issuance date of the financial statements. The accounting standard is effective for interim and annual periods ending after December 15, 2016 and will not have a material impact on the consolidated financial statements but may impact the Company’s footnote disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU provides for a single comprehensive model for use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for interim and annual periods beginning after December 15, 2016 with no early adoption permitted. In April 2015, the FASB proposed a one year deferral of the effective date of this accounting update to annual periods beginning after December 15, 2017, along with an option to permit early adoption. The Company is required to adopt the amendments in the ASU using one of two acceptable methods. The Company is currently in the process of determining which adoption method it will apply and evaluating the impact of the guidance on its consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

3. Fair Value Measurements

The Company records cash equivalents and marketable securities at fair value. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of June 30, 2016 (in thousands):


	Level 1		Level 2		Level 3		Total
Cash equivalents	$	225,564	$	—	$	—	$	225,564
Marketable securities:
Certificates of deposit		—		15,790		—		15,790
Government securities		169,179		—		—		169,179
Corporate debt securities		—		93,278		—		93,278

	$	394,743	$	109,068	$	—	$	503,811

The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2015 (in thousands):


	Level 1		Level 2		Level 3		Total
Cash equivalents	$	59,332	$	—	$	—	$	59,332
Marketable securities:
Certificates of deposit		—		11,243		—		11,243
Government securities		292,900		—		—		292,900

	$	352,232	$	11,243	$	—	$	363,475

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2016 or December 31, 2015.

The carrying amounts reflected in the condensed consolidated balance sheets for cash, collaboration receivable – related party, tenant improvement and other receivables, prepaid expenses and other current assets, other assets, accounts payable, and accrued expenses approximate their fair values at June 30, 2016 and December 31, 2015, due to their short-term nature.

There have been no changes to the valuation methods during the three and six months ended June 30, 2016 or 2015. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between Level 1 and Level 2 during the three and six months ended June 30, 2016 and 2015. The Company had no financial assets or liabilities that were classified as Level 3 at any point during the three and six months ended June 30, 2016 or the year ended December 31, 2015.

4. Marketable Securities

Marketable securities at June 30, 2016 and December 31, 2015 consisted primarily of investments in certificates of deposit, government securities and corporate debt securities. Management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its marketable securities as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities. Marketable securities are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive loss in stockholders’ equity and a component of total comprehensive loss in the condensed consolidated interim statements of comprehensive loss, until realized. Realized gains and losses are included in investment income on a specific-identification basis. There were no realized gains or losses on marketable securities for the six months ended June 30, 2016 and, as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the periods. There were immaterial realized gains on marketable securities for the three and six months ended June 30, 2015.

Marketable securities at June 30, 2016 consist of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Certificates of deposit	$	5,040	$	2	$	—		$	5,042
Government securities		158,571		91		(1	)		158,661
Corporate debt securities		67,586		38		(6	)		67,618
Non-current:
Certificates of deposit		10,720		31		(3	)		10,748
Government securities		10,511		7		—			10,518
Corporate debt securities		25,522		138		—			25,660

	$	277,950	$	307	$	(10	)	$	278,247

Marketable securities at December 31, 2015 consist of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Certificates of deposit	$	11,248	$	—	$	(5	)	$	11,243
Government securities		234,130		10		(145	)		233,995
Non-current:
Government securities		59,083		—		(178	)		58,905

	$	304,461	$	10	$	(328	)	$	304,143

At June 30, 2016 and December 31, 2015, the Company held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that (i) have a maturity of one to two years and (ii) management does not intend to liquidate within the next twelve months, although these funds are available for use and therefore classified as available-for-sale.

The Company reviews marketable securities for other-than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the condensed consolidated interim statements of operations if the Company has experienced a credit loss, has the intent to sell the marketable security, or if it is more likely than not that the Company will be required to sell the marketable security before recovery of the amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.

At June 30, 2016 and December 31, 2015, the Company held 13 and 74 debt securities that were in an unrealized loss position for less than one year, respectively. The aggregate fair value of debt securities in an unrealized loss position at June 30, 2016 and December 31, 2015 was $20.3 million and $207.4 million, respectively. There were no individual securities that were in a significant unrealized loss position as of June 30, 2016 and December 31, 2015. The Company evaluated its securities for other-than-temporary impairment and considered the decline in market value for the securities to be primarily attributable to current economic and market conditions. It is not more likely than not that the Company will be required to sell the securities, and the Company does not intend to do so prior to the recovery of the amortized cost basis. Based on this analysis, these marketable securities were not considered to be other-than-temporarily impaired as of June 30, 2016 and December 31, 2015.

5. Collaboration Agreements

2010 Agreement and amendments

In April 2010, the Company entered into a collaboration agreement focused on cancer metabolism with Celgene Corporation and related subsidiaries (“Celgene”), a related party through ownership of the Company’s common stock. The agreement was amended in October 2011 and July 2014 (the agreement together with the amendments, the “2010 Agreement”). The goal of the collaboration is to discover, develop and commercialize disease-altering therapies in oncology based on the Company’s cancer metabolism research platform. The Company will initially lead discovery, preclinical and early clinical development for all cancer metabolism programs under the collaboration. The discovery phase of the 2010 Agreement expired in April 2016.

The July 2014 amendment of the 2010 Agreement allowed for more flexibility in the design and conduct of phase 1 clinical trials and additional nonclinical and/or clinical activities that the Company agreed to perform at Celgene’s request. This amendment further modified the mechanism and timing for payments to be made with respect to such development activities.

Under the 2010 Agreement, the Company is eligible to receive up to $120.0 million in potential milestone payments for the AG-221 program. The potential milestone payments are comprised of: (i) a $25.0 million milestone payment upon achievement of a specified clinical development milestone event, (ii) up to $70.0 million in milestone payments upon achievement of specified regulatory milestone events, and (iii) a $25.0 million milestone payment upon achievement of a specified commercial milestone event. In January 2016, the Company determined that a substantive clinical development milestone related to the AG-221 program was achieved and received a milestone payment of $25.0 million.

Under the 2010 Agreement, the Company may also receive royalties at tiered, low- to mid-teen percentage rates on net sales. The royalty payments will be recognized as revenue in the period in which they are earned. To date, the Company has not earned any royalty payments under the 2010 Agreement.

Unless terminated earlier by either party, the term of the 2010 Agreement will continue until the expiration of the last-to-expire of all royalty terms with respect to all royalty-bearing products. Celgene may terminate this agreement for convenience in its entirety or with respect to one or more programs upon ninety days written notice to the Company. If either party is in material breach and fails to cure such breach within the specified cure period, the other party may terminate the 2010 Agreement in its entirety or with respect to one or more programs; however, if such breach relates solely to a specific program, the non-breaching party may only terminate the agreement with respect to such program. Either the Company or Celgene may terminate the agreement in the event of specified insolvency events involving the other party.

AG-881 Agreements

On April 27, 2015, the Company entered into a joint worldwide development and profit share collaboration and license agreement with Celgene and the Company’s wholly owned subsidiary, Agios International Sarl, entered into a collaboration and license agreement with Celgene International II Sarl (collectively, the “AG-881 Agreements”). The AG-881 Agreements establish a worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, the Company received an initial payment of $10.0 million in May 2015 and is eligible to receive milestone-based payments described below. The Company and Celgene will equally split all worldwide development costs, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.

The Company is eligible to receive up to $70.0 million in potential milestone payments related to AG-881 under the AG-881 Agreements. The potential milestone payments are comprised of: (i) a $15.0 million milestone payment for filing of first NDA in a major market and (ii) up to $55.0 million in milestone payments upon achievement of specified regulatory milestone events. The Company may also receive royalties at tiered, low- to mid-teen percentage rates on net sales if it elects to not participate in the development and commercialization of AG-881.

2016 Agreement

On May 17, 2016, Agios entered into a master research and collaboration agreement (the “2016 Agreement”) with Celgene and Celgene RIVOT Ltd. The 2016 Agreement establishes a new global collaboration focused on the research and development of immunotherapies against certain metabolic targets that exert their antitumor efficacy primarily via the immune system. In addition to new programs identified under the 2016 Agreement, Agios and Celgene have also agreed that all future development and commercialization of two programs that were conducted under the 2010 Agreement will now be governed by the 2016 Agreement.

During the research term of the 2016 Agreement, the Company plans to conduct research programs focused on discovering compounds that are active against metabolic targets in the immuno-oncology, or IO, field. The initial four-year research term will expire on May 17, 2020. Celgene may extend the research term for up to two, or in specified cases, up to four, additional one-year terms.

For each program under the 2016 Agreement, Agios may nominate compounds that meet specified criteria as development candidates, and, in limited circumstances, Celgene may also nominate compounds as development candidates for each such program. Celgene may designate the applicable program for further development following any such nomination, after which the Company may conduct, at the Company’s expense, additional pre-clinical and clinical development for such program through completion of an initial phase 1 dose escalation study.

At the end of the research term, Celgene may designate for continued development up to three research programs for which development candidates have yet to be nominated, which are referred to as continuation programs. Agios may conduct further research and pre-clinical and clinical development activities on any continuation program, at the Company’s expense, through completion of an initial phase 1 dose escalation study.

The Company has granted Celgene the right to obtain exclusive options to development and commercialization rights for each program that Celgene has designated for further development and for each continuation program. Celgene may exercise each such option beginning on the designation of a development candidate for such program (or on the designation of such program as a continuation program) and ending on the earlier of the end of a specified period after Celgene is furnished with specified information about the initial phase 1 dose escalation study for such program, or January 1, 2030. Research programs that have applications in the inflammation or autoimmune, or I&I, field that may result from the 2016 Agreement will also be subject to the exclusive options described above.

Agios will retain rights to any program that Celgene does not designate for further development or as to which Celgene does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, Agios or its affiliates and Celgene will enter into either a co-development and co-commercialization agreement if such program is in the IO field, or a license agreement if such program is in the I&I field. Under each co-development and co-commercial agreement, the Company and Celgene will co-develop and co-commercialize licensed products worldwide. Either Agios or Celgene will lead development and commercialization of licensed products for the United States and Celgene will lead development and commercialization of licensed products outside of the United States. Depending on the country, the Company and Celgene will each have the right to provide a portion of field-based marketing activities. Under each license agreement, Celgene will have the sole right to develop and commercialize licensed products worldwide.

Co-development and co-commercialization agreements

Under each co-development and co-commercialization agreement entered into under the 2016 Agreement, Agios and Celgene will split all post-option-exercise worldwide development costs, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed products. Celgene has the option to designate one program in the IO field as the 65/35 program, for which Celgene will be the lead party for the United States and will have a 65% profit or loss share. For programs in the IO field other than the 65/35 program, the Company and Celgene will alternate, on a program-by-program basis, being the lead party for the United States, with Agios having the right to be the lead party for the first such program, and Agios and Celgene will each have a 50% profit or loss share. The lead party for the United States will book commercial sales of licensed products, if any, in the United States, and Celgene will book commercial sales of licensed products, if any, outside of the United States.

License agreements

Under each license agreement under the 2016 Agreement, Celgene will be responsible for all post-option-exercise worldwide development and associated costs, subject to specified exceptions, as well as worldwide commercialization and associated costs, for licensed products.

Financial terms

Under the terms of the 2016 Agreement, Celgene made an initial upfront payment in the amount of $200 million. Celgene has specified rights to extend the research term for up to two, or in specified cases, up to four, additional years by paying a $40 million per-year extension fee. Celgene will pay an $8 million designation fee for each program that Celgene designates for further development and for each continuation program. For each program as to which Celgene exercises its option to develop and commercialize, subject to antitrust clearance, Celgene will pay an option exercise fee of at least $30 million for any designated development program and at least $35 million for any continuation programs. In certain cases, Celgene may exercise its option to develop and commercialize two early-stage I&I programs, prior to Celgene designating the program for further development, by paying an option exercise fee of $10 million.

For the co-development and co-commercialization program Celgene designates the 65/35 program in the IO field, the Company is eligible to receive up to $209 million in potential milestone-based payments. The potential milestone-based payments for that program are comprised of: (i) a $25 million milestone-based payment upon achievement of a specified clinical development event and (ii) up to $184 million in milestone-based payments upon achievement of specified regulatory milestone events. For each co-development and co-commercialization program in the IO field other than the 65/35 program, Agios is eligible to receive up to $169 million in potential milestone-based payments payable for each program selected by Celgene. The potential milestone-based payments for such programs are comprised of: (i) a $20 million milestone-based payment upon achievement of a specified clinical development event and (ii) up to $149 million in milestone-based payments upon achievement of specified regulatory milestone events.

For each licensed program in the I&I field, Agios is eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any, of the applicable licensed products and up to $386 million in potential milestone-based payments. The potential milestone-based payments for such programs are comprised of: (i) a $25 million milestone-based payment upon achievement of a specified clinical development event, (ii) up to $236 million in milestone-based payments upon achievement of specified regulatory milestone events, and (iii) up to $125 million in milestone-based payments upon achievement of specified commercial milestone events.

Opt-out right

Under the 2016 Agreement, the Company may elect to opt out of the cost and profit share under any co-development and co-commercialization agreement, subject to specified exceptions. Upon opting out, Celgene will have the sole right to develop, manufacture and commercialize the applicable licensed products throughout the world, at its cost, and the Company will undertake

transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at the Company’s expense. Further, in lieu of the profit or loss sharing described above, Agios would be eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any, of the applicable licensed products. However, the Company would continue to be eligible to receive the developmental and regulatory milestone-based payments described above.

Term

The term of the 2016 Agreement commenced on May 17, 2016 and, if not terminated earlier, will expire upon later of the last-to-expire of the research term and all option exercise periods, or, if an option is exercised by Celgene for one or more programs in the collaboration, upon the termination or expiration of the last-to-exist co-development and co-commercialization agreement or license agreement, as applicable, for any such program.

Termination

Subject to specified exceptions, Celgene may terminate the 2016 Agreement in its entirety for any reason by providing Agios with prior written notice if there are no active co-development and co-commercialization agreements or license agreements in place or on a program-by-program basis if there are no active co-development and co-commercialization agreements or license agreements in place for the terminated program(s). Either party may terminate the 2016 Agreement for the insolvency of the other party. On a program-by-program basis, prior to the exercise of an option, either party may terminate the 2016 Agreement either in its entirety or with respect to one or more programs on prior written notice to the other party in the case of an uncured material breach by the other party that frustrates the fundamental purpose of the 2016 Agreement. Following the exercise of an option for a program, either party may terminate the 2016 Agreement with respect to such program if such party terminates the co-development and co-commercialization agreement or license agreement for such program for an uncured material breach by the other party that frustrates the fundamental purpose of such agreement. Either party may terminate a co-development and co-commercialization agreement or a license agreement upon the bankruptcy or insolvency of the other party. Either party also has the right to terminate the co-development and co-commercialization agreement or license agreement if the other party or any of its affiliates challenges the validity, scope or enforceability of or otherwise opposes, any patent included within the intellectual property rights licensed to the other party under such agreement.

Exclusivity

While any of Celgene’s options remain available under the 2016 Agreement, subject to specified exceptions, the Company may not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO field or the I&I field with specified activity against a metabolic target.

During the term of each co-development and co-commercialization agreement and license agreement, subject to specified exceptions, neither the Company nor Celgene may directly or indirectly develop, manufacture or commercialize outside of such agreement any therapeutic modality in any field with specified activity against the metabolic target that is the focus of the program licensed under such agreement.

AG-120 letter agreement

On May 17, 2016, Agios entered into a letter agreement with Celgene regarding AG-120 (the “AG-120 Letter Agreement”). Under the AG-120 Letter Agreement, Celgene and the Company have agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which AG-120 is the lead development candidate. Under the 2010 Agreement, Celgene Corporation had held development and commercialization rights to the IDH1 program outside of the United States, and Agios holds such rights inside the United States. As a result of the AG-120 Letter Agreement, the Company will obtain global rights to AG-120 and the IDH1 program. Neither party will have any financial obligation, including royalties or milestone payments, to the other concerning AG-120 or the IDH1 program after final reconciliation of specified shared development costs. Under the AG-120 Letter Agreement, the parties have also agreed to conduct specified transitional activities in connection with the termination. In addition, pursuant to the AG-120 Letter Agreement, the parties are released from their exclusivity obligations under the 2010 Agreement with respect to the IDH1 program. The AG-120 Letter Agreement does not alter the global collaboration with Celgene Corporation pursuant to the collaboration and license agreements entered into with Celgene Corporation and Celgene International II Sarl on April 27, 2015 concerning AG-881, which is directed to both the IDH1 target and the IDH2 target.

Accounting analysis and revenue recognition – collaboration revenue

Pre-July 2014

Prior to the July 2014 amendment of the 2010 Agreement, the Company concluded that none of the identified deliverables had stand-alone value and, therefore, accounted for the deliverables as a single unit of accounting. The Company further concluded it was unable to estimate the fair value of the undelivered items within the 2010 Agreement. All considerations were recognized on a straight-line basis through the period over which the Company expected to fulfill its performance obligations (the performance period), which was initially determined to be six years.

July 2014 – April 2015

The July 2014 amendment of the 2010 Agreement was determined to be a material modification of the 2010 Agreement due to the change in the total potential consideration that was more than insignificant and significant changes to certain of the deliverables in the arrangement. Upon concluding that the 2010 Agreement had been materially modified in July 2014, the Company identified the remaining deliverables under the arrangement and determined its best estimates of selling price for the undelivered elements as of the modification date as vendor specific objective evidence and third-party evidence were not available. The Company then allocated the total arrangement consideration, which included the remaining deferred revenue balance at the modification date and other consideration that was deemed to be determinable at the modification date, to each unit of accounting based on its best estimate of selling price. The difference between the total arrangement consideration and the best estimate of selling price of the undelivered items was recognized as revenue at the modification date.

The undelivered items from the July 2014 modification, the related best estimate of selling price, the method of recognizing the allocated consideration, and the revenue recognized related to each unit of account through April 27, 2015, the effective date of the AG-881 Agreements was as follows:

•

License for the split licensed program – AG-120: The Company developed the best estimate of selling price of the license by probability weighting multiple cash flow scenarios using the income approach. There were significant judgments and estimates inherent in the determination of the best estimate of selling price of this unit of accounting. Should different reasonable assumptions be utilized, the best estimate of selling price and the associated revenue recognized would be different. The Company allocated $21.2 million to the license which was delivered in January 2015. During the period April 1, 2015 through April 27, 2015 and for the period January 1, 2015 through April 27, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $0.1 million and $15.8 million, respectively, as collaboration revenue.

•

Development services for five separate on-going phase 1 clinical trials (each of which is a separate unit of accounting): The Company developed the best estimate of selling price of the on-going phase 1 clinical trial development services of $50.8 million for all five studies using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The amount allocated to these units of accounting is recognized as revenue on a proportional performance basis as services are provided. As committed to on the date of the July 2014 amendment, the Company has completed services for three of the on-going phase 1 clinical trials and expected services for the remaining two on-going phase 1 clinical trials are expected to be performed through the second quarter of 2016. As additional consideration is earned and allocated to the three fully delivered units of accounting it is recognized immediately. During the period April 1, 2015 through April 27, 2015 and for the period January 1, 2015 through April 27, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $0.4 million and $14.7 million, respectively, as collaboration revenue.

•

On-going research and development: The Company developed the best estimate of selling price of the research and development services of $13.6 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider. The amount allocated to this unit of accounting was recognized as revenue ratably over the performance period. During the period April 1, 2015 through April 27, 2015 and for the period January 1, 2015 through April 27, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $1.0 million and $5.0 million, respectively, as collaboration revenue.

•

Committee participation: The Company developed the best estimate of selling price of the committee participation services of $0.2 million using management’s best estimate of the anticipated participation hours multiplied by a market rate for comparable participants. The amount allocated to this unit of accounting was recognized as revenue ratably over the performance period. During the period April 1, 2015 through April 27, 2015 and for the period January 1, 2015 through April 27, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $0.1 million as collaboration revenue.

In December 2014, Celgene elected to extend the term of the discovery period over which the Company was providing on-going research and development services from five to six years, to April 2016. As a result of the extension, the Company received a $20.0

million extension payment from Celgene in May 2015. The Company evaluated the extension and concluded that upon exercise it is obligated to provide its committee participation and research and development services for a period of one year from April 2015 through April 2016, and as such revenue should be recognized ratably over the performance period of April 2015 to April 2016 as services are rendered. The Company recognized revenue of $0.7 million related to this substantive option during the period April 16, 2015 through April 27, 2015.

Beginning in the first quarter of 2015, the Company and Celgene agreed to plans to advance AG-221 into later stage development studies. Pursuant to the terms of the 2010 Agreement, the parties agreed to transition primary development responsibilities for AG-221 to Celgene for later stage development at which point Celgene became the lead development party for AG-221. During the transition, the Company continued to manage certain arrangements with third-party service providers whose contracts were assigned to Celgene. The Company determined it is no longer the primary obligor of these arrangements and, when considering the other factors included within ASC 605-45, Revenue Recognition – Principal Agent Considerations, determined reimbursement of amounts incurred under third-party contracts should be reported on a net basis within research and development expense. The Company re-assessed its estimate of the total level of effort required to perform the development services related to AG-221 as a result of the contract assignments and recorded a change in estimate during the three months ended March 31, 2015. This change in estimate resulted in the recognition of an additional $5.1 million of revenue, which is included within revenue related to development services for five separate on-going phase 1 clinical trials discussed earlier within this footnote. Including the $3.8 million presented as a reduction of research and development expenditures, the change in estimate reduced the Company’s net loss by $8.9 million and caused a decrease in net loss per share of $0.24 during the three months ended March 31, 2015.

During the period January 1, 2015 through April 27, 2015, the execution date of the AG-881 Agreements, the Company performed planning services on behalf of Celgene related to an expanded phase 1 clinical trial of AG-221. The Company determined the work represented a substantive option under the 2010 Agreement. The Company also determined it is not the primary obligor of the underlying third-party contracts and determined that reimbursements of amounts incurred under the contracts should be reported on a net basis in research and development expense. Reimbursements of services performed directly by the Company are presented on a gross basis as collaboration revenue. During the period April 1, 2015 through April 27, 2015 and for the period January 1, 2015 through April 27, 2015, the Company recognized $0.3 million and $0.4 million, respectively, in revenues and recorded $0.3 million and $0.9 million, respectively, as a reduction in research and development costs related to these services. Costs reimbursed for services performed directly by the Company are presented as collaboration revenues.

April 2015 – May 2016

The AG-881 Agreements, executed on April 27, 2015, were determined to be a modification of the 2010 Agreement due to the AG-881 Agreements including a compound originally identified within the 2010 Agreement. As a result of the modification the Company identified the remaining deliverables under the 2010 Agreement and the AG-881 Agreements with Celgene and determined the best estimate of selling price for the undelivered elements as of the modification date. The Company then allocated the total arrangement consideration, which included the remaining deferred revenue balance at the modification date, the initial payment of $10.0 million under the AG-881 Agreements and other consideration under the 2010 Agreement and the AG-881 Agreements that was deemed to be determinable at the modification date, to each unit of accounting relative to its best estimate of selling price. The undelivered items, which are each considered by the Company to have stand-alone value and therefore are separate units of accounting, the related best estimate of selling price at April 27, 2015, and the method of recognizing the allocated consideration, for each unit of accounting are as follows:

•

Licenses for the AG-881 program: The Company developed the best estimate of selling price of the U.S. license and the rest of world license by probability weighting multiple cash flow scenarios using the income approach. Management estimates within the models include the expected, probability-weighted net profits from estimated future sales, an estimate of the direct cost incurred to generate future cash flows, a discount rate and other business forecast factors. There are significant judgments and estimates inherent in the determination of the best estimate of selling price of these units of accounting. These judgments and estimates include assumptions regarding future operating performance, the timelines of the clinical trials and regulatory approvals and the estimated patient populations. Should different reasonable assumptions be utilized, the best estimate of selling price and the associated revenue recognized would be different. The Company developed a best estimate of selling price of the licenses of $33.2 million. The Company recognizes the non-contingent consideration allocated to these units of accounting upon delivery of the licenses to Celgene which occurred immediately upon the execution of the AG-881 Agreements. During the period April 1, 2016 through May 17, 2016, the effective date of the 2016 Agreement, and for the period January 1, 2016 through May 17, 2016, the Company recognized the non-contingent consideration allocated to this unit of accounting of $0.5 million and $1.4 million, respectively, as collaboration revenue. For the period April 27, 2015 through June 30, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $8.8 million as collaboration revenue.

•

Four separate on-going development services for which the Company determined it is acting as the principal of all development activities (each of which is a separate unit of accounting): The Company developed the best estimate of

selling price for all four of the on-going development services of $12.7 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The estimated costs were determined to represent management’s best estimate of the price these services could be sold for separately. The amount allocated to these units of accounting is being recognized as revenue on a proportional performance basis as services are provided. The Company expects the services to be performed through 2017. When considering the factors included within ASC 605-45, the Company determined it is the principal of all development activities and is required to present reimbursement of amounts incurred for these services as revenue. During the period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, the Company recognized the non-contingent consideration allocated to these units of accounting of $0.6 million and $1.7 million, respectively, as collaboration revenue. For the period April 27, 2015 through June 30, 2015, the Company recognized the non-contingent consideration allocated to these units of accounting of $0.6 million as collaboration revenue.

•

Four separate on-going development services for which the Company determined it is not acting as the principal of all development activities (each of which is a separate unit of accounting): The Company developed the best estimate of selling price for all four of the on-going development services of $97.3 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The estimated costs were determined to represent management’s best estimate of the price these services could be sold for separately. The amount allocated to these units of accounting is being recognized on a proportional performance basis as services are provided. The Company expects the services to be performed through 2017. When considering the factors included within ASC 605-45, the Company determined it is not the principal of all development activities and is required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. During the period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, the Company recognized the non-contingent consideration allocated to these units of accounting of $2.6 million and $7.5 million, respectively, as a reduction of research and development costs related to these services. For the period April 27, 2015 through June 30, 2015, the Company recognized the non-contingent consideration allocated to these units of accounting of $3.4 million as a reduction of research and development costs related to these services.

•

On-going research and development: The Company developed the best estimate of selling price of the research and development services of $30.5 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider. The amount allocated to this unit of accounting is being recognized as revenue ratably over the performance period through April 2016. During the period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, the Company recognized the non-contingent consideration allocated to this unit of accounting of $1.0 million and $4.6 million, respectively, as collaboration revenue. For the period April 27, 2015 through June 30, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $1.4 million as collaboration revenue.

•

Committee participations under the 2010 Agreement and AG-881 Agreements: The Company developed the best estimate of selling price of the committee participation services of $0.8 million using management’s best estimate of the anticipated participation hours multiplied by a market rate for comparable participants. The amount allocated to this unit of accounting is being recognized as revenue ratably over the performance period, through the fourth quarter of 2016. During the period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, the Company recognized the non-contingent consideration allocated to this unit of accounting $32 thousand and $89 thousand, respectively, as collaboration revenue. For the period April 27, 2015 through June 30, 2015, the Company recognized the non-contingent consideration allocated to this unit of accounting of $22 thousand as collaboration revenue.

The total estimated arrangement consideration, as well as the expected timing of revenue recognition, is adjusted based on changes in estimated arrangement consideration as a result of changes in estimates for on-going development services. The allocable consideration will increase as the Company performs certain services for which it is eligible to receive additional consideration. These amounts will be recognized on a cumulative catch-up basis for any in-process units of accounting or immediately for any fully delivered units of accounting. The estimated arrangement consideration may decrease if the Company receives less reimbursement than initially estimated.

As a result of Celgene assuming the primary development responsibilities for AG-221 in the first quarter of 2015, the Company recorded $0.4 million and $0.9 million of third-party costs incurred on behalf of Celgene during period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, respectively, as a reduction of research and development costs.

Beginning in the third quarter of 2015, the Company initiated a phase 1b frontline combination clinical trial of AG-221 and AG-120 for which it will receive reimbursement from Celgene. The new combination trial was determined to be a substantive option under the 2010 Agreement. When considering the factors included within ASC 605-45, management determined that the Company is the

principal for the efforts related to the AG-221 arm of the combination trial but is acting in the role of an agent for the efforts related to the AG-120 arm of the combination trial. Accordingly, consideration earned related to the AG-221 arm of the combination trial is recognized as collaboration revenue in the period earned and consideration earned related to the AG-120 arm of the combination trial is reported as a reduction of research and development expense in the period earned. During the period April 1, 2016 through May 17, 2016, the effective date of the 2016 Agreement, and for the period January 1, 2016 through May 17, 2016, the Company recognized $0.5 million and $1.2 million, respectively, in collaboration revenue and recorded $0.2 million and 0.3 million, respectively, as a reduction of research and development costs related to the combination trial.

During the period April 1, 2016 through May 17, 2016 and for the period January 1, 2016 through May 17, 2016, the Company incurred an additional $1.1 million and $4.4 million, respectively, in reimbursable development expenses related to the AG-120 and AG-881 programs that were not contemplated as of the April 2015 modification. The amounts are recorded as a reduction of research and development costs of each respective program.

Post-May 2016

The 2016 Agreement, executed on May 17, 2016, was determined to be a modification of the 2010 Agreement and the AG-881 Agreements because it includes compounds originally identified within the 2010 Agreement. As a result of the modification the Company identified the undelivered elements under the 2010 Agreement, the AG-881 Agreements and 2016 Agreements with Celgene (collectively, the “Celgene Agreements”) and determined the best estimate of selling price for the undelivered elements as of the modification date. The Company then allocated the total arrangement consideration, which included the remaining deferred revenue balance at the modification date, the upfront payment of $200.0 million under the 2016 Agreement and other consideration under the Celgene Agreements that were deemed to be determinable at the modification date, to each unit of accounting relative to its best estimate of selling price. The undelivered items, which are each considered by the Company to have stand-alone value and therefore are separate units of accounting, the related best estimate of selling price at May 17, 2016, and the method of recognizing the allocated consideration, for each unit of accounting are as follows:

•

Three separate development services for which the Company determined it is acting as the principal of all development activities (each of which is a separate unit of accounting): The Company developed the best estimate of selling price for all three of the development services of $67.8 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The estimated costs were determined to represent management’s best estimate of the price these services could be sold for separately. The amount allocated to these units of accounting is being recognized as revenue on a proportional performance basis as services are provided. The Company expects the services to be performed through 2019. When considering the factors included within ASC 605-45, the Company determined it is the principal of all development activities and is required to present reimbursement of amounts incurred for these services as revenue. For the period May 17, 2016 through June 30, 2016, the Company recognized the non-contingent consideration allocated to these units of accounting of $1.7 million as collaboration revenue.

•

Three separate on-going development services for which the Company determined it is not acting as the principal of all development activities (each of which is a separate unit of accounting): The Company developed the best estimate of selling price for all three development services of $22.4 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The estimated costs were determined to represent management’s best estimate of the price these services could be sold for separately. The amount allocated to these units of accounting is being recognized on a proportional performance basis as services are provided. The Company expects the services to be performed through 2019. When considering the factors included within ASC 605-45, the Company determined it is not the principal of all development activities and is required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. For the period May 17, 2016 through June 30, 2016, the Company recognized the non-contingent consideration allocated to these units of accounting of $1.3 million as a reduction of research and development costs related to these services.

•

On-going research and development: The Company developed the best estimate of selling price of the research and development services of $207 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider. The amount allocated to this unit of accounting is being recognized as revenue ratably through May 2022, the expected performance period. For the period May 17, 2016 through June 30, 2016, the Company recognized the non-contingent consideration allocated to this unit of accounting of $2.7 million as collaboration revenue.

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Committee participations under the 2010 Agreement, AG-881 Agreements and 2016 Agreement: The Company developed the best estimate of selling price of the committee participation services of $1.5 million using management’s best estimate of the anticipated participation hours multiplied by a market rate for comparable participants. The amount allocated to this unit of accounting is being recognized as revenue ratably over the expected performance period, December 2022. For the period May 17, 2016 through June 30, 2016, the Company recognized the non-contingent consideration allocated to this unit of accounting of $17 thousand as collaboration revenue.

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Additional development activities for which the Company determined it is acting as the principal of all development activities: The Company developed the best estimate of selling price of the development service of $48.7 million using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider, as well as internal full time equivalent costs to support the development services. The estimated costs were determined to represent management’s best estimate of the price these services could be sold for separately. The activities under this unit of accounting are not expected to begin until 2020. When considering the factors included within ASC 605-45, the Company determined it is the principal of all development activities and is required to present reimbursement of amounts incurred for these services as revenue. For the period May 17, 2016 through June 30, 2016, the Company has not recognized any revenue associated with this unit of account.

As a result of Celgene assuming the primary development responsibilities for AG-221 in the first quarter of 2015, the Company recorded $0.4 million of third-party costs incurred on behalf of Celgene for the period May 17, 2016 through June 30, 2016 as a reduction of research and development costs.

During the three months ended June 30, 2016 and 2015, the Company recognized a total of $7.0 million and $13.2 million, respectively, as collaboration revenue and recognized $5.9 million and $4.5 million, respectively, as a reduction of research and development expenses. During the six months ended June 30, 2016 and 2015, the Company recognized a total of $13.3 million and $47.4 million, respectively, as collaboration revenue and recognized $14.7 million and $8.9 million, respectively, as a reduction of research and development expenses.

In determining the current and noncurrent classification of deferred revenue, the Company considers the total consideration expected to be earned in the next twelve months for services to be performed under certain units of accounting and the estimated proportional performance and timing of delivery of certain deliverables to determine the deferred revenue balance that will remain twelve months from the balance sheet date. As of June 30, 2016 and December 31, 2015, the Company has recorded a collaboration receivable of $7.9 million and $8.2 million, respectively, related to reimbursable development costs.

Accounting analysis and revenue recognition – milestone revenue

The Company concluded that certain of the clinical development and regulatory milestone payments that may be received under the 2010 Agreement, the AG-881 Agreements and the 2016 Agreement, if the Company is involved in future product development and commercialization, are substantive. Factors considered in the evaluation of the milestones included the degree of risk associated with performance of the milestone, the level of effort and investment required, whether the milestone consideration was reasonable relative to the deliverables and whether the milestone was earned at least in part based on the Company’s performance. Revenue from substantive milestones, if they are nonrefundable, is recognized as revenue upon successful accomplishment of the milestones. Clinical and regulatory milestones are deemed non-substantive if they are based solely on the collaborator’s performance. Non-substantive milestones will be recognized when achieved to the extent the Company has no remaining performance obligations under the arrangement. Milestone payments earned upon achievement of commercial milestone events will be recognized when earned.

In January 2016, the Company determined that a substantive clinical development milestone related to the AG-221 program under the 2010 Agreement was achieved and received a milestone payment of $25.0 million, which was recognized as revenue during the three months ended March 31, 2016. No other milestones were earned during the six months ended June 30, 2016 or for the year ended December 31, 2015. There are no milestones that are expected to be achieved in the near term.

6. Accrued Expenses

Accrued expenses consist of the following (in thousands):


	June 30, 2016		December 31, 2015
Accrued compensation	$	6,352	$	7,005
Accrued contracted research and development costs		6,214		7,449
Accrued professional fees		1,641		228
Accrued other		207		1,314

Total	$	14,414	$	15,996

7. Share-Based Payments

2013 Stock Incentive Plan

In June 2013, the Company’s Board of Directors adopted and, in July 2013, the Company’s stockholders approved the 2013 Stock Incentive Plan (the “2013 Plan”). The 2013 Plan became effective upon the closing of the Company’s Initial Public Offering, or IPO, and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. Following the adoption of the 2013 Plan, the Company granted no further stock options or other awards under the 2007 Stock Incentive Plan, or 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of June 30, 2016, the total number of shares reserved under the 2007 Plan and the 2013 Plan are 6,546,275 and the Company had 981,516 shares available for future issuance under such plans. The 2013 Plan provides for an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2014 and continuing until the expiration of the 2013 Plan, equal to the lesser of (i) 2,000,000 shares of common stock, (ii) 4% of the outstanding shares of common stock on such date or (iii) an amount determined by the Company’s Board of Directors. On January 1, 2016 and 2015, the annual increase for the 2013 Plan resulted in an additional 1,507,860 shares and 1,484,020 shares, respectively, authorized for issuance.

The following table summarizes all stock option activity for the six months ended June 30, 2016:


	Number of Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2015		4,618,697		$	44.45		7.49	$	153,573
Granted		1,155,940			42.61
Exercised		(313,183	)		6.36
Forfeited/expired		(78,265	)		73.33

Outstanding at June 30, 2016		5,383,189		$	45.85		7.63	$	73,370

Exercisable at June 30, 2016		2,452,292		$	30.04		6.26	$	58,983

Vested and expected to vest at June 30, 2016		5,037,783		$	46.38		7.60	$	67,811

The weighted-average grant date fair value of options granted was $31.89, $64.19, $27.17 and $67.57 during the three months ended June 30, 2016 and 2015 and six months ended June 30, 2016 and 2015, respectively. The total intrinsic value of options exercised was $5.3 million and $11.3 million during the three months ended June 30, 2016 and 2015, respectively, and $15.3 million and $29.4 million during the six months ended June 30, 2016 and 2015, respectively.

At June 30, 2016, the total unrecognized compensation expense related to unvested stock option awards, including estimated forfeitures, was $95.4 million, which the Company expects to recognize over a weighted-average period of approximately 2.70 years. The Company also has unrecognized stock-based compensation expense of $8.2 million related to stock options and performance-based stock units both with performance-based vesting criteria that are not considered probable of achievement as of June 30, 2016.

Restricted stock units

The Company may grant awards of restricted stock units (“RSUs”) to non-employee directors, members of the management team and employees on a discretionary basis pursuant to the 2013 Plan. Each RSU entitles the holder to receive, at the end of each vesting period, a specified number of shares of the Company’s common stock.

During the three months ended March 31, 2016, the Company granted 58,800 RSUs to various employees; no RSUs were granted during the three months ended June 30, 2016. The Company granted 15,000 RSUs during the three and six months ended June 30, 2015. The Company recorded stock-based compensation expense related to RSUs of $0.5 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively, and stock-based compensation expenses of $0.9 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively. These amounts are included in the total stock-based compensation expense disclosed below. As of June 30, 2016, there was approximately $2.6 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 1.5 years.

The following table presents RSU activity for the six months ended June 30, 2016:


	Number of Stock Units			Weighted-average grant date fair value
Unvested shares at December 31, 2015		15,000		$	122.22
Granted		58,800			39.76
Vested		(7,500	)		122.22

Unvested shares at June 30, 2016		66,300		$	49.09

Performance-based stock options

During the three and six months ended June 30, 2016 and 2015, no options to purchase shares of common stock that contain performance-based or a combination of performance-based and service-based vesting criteria were granted by the Company. However, certain performance-based stock options issued in prior periods were still outstanding as of June 30, 2016. Performance-based vesting criteria for options primarily relate to milestone events specific to the Company’s corporate goals, including but not limited to certain preclinical, clinical and regulatory development milestones related to the Company’s product candidates. Stock-based compensation expense associated with these performance-based stock options is recognized if the performance condition is considered probable of achievement using management’s best estimates. As of June 30, 2016, certain of the performance-based milestones had been achieved. The achievements of certain other milestones have been deemed probable and therefore the related expense either has been fully recognized or is being recognized over the remaining service period. The achievement of the remaining milestones was deemed to be not probable as of June 30, 2016 and, therefore, no expense has been recognized related to these awards. During the three and six months ended June 30, 2015, the Company recognized stock-based compensation expense of $0.1 million and $0.3 million, respectively, related to stock options with performance-based vesting criteria. During the three and six months ended June 30, 2016, the Company did not recognize any stock-based compensation expense related to stock options with performance-based vesting criteria.

Performance-based stock units

In December 2015, pursuant to the 2013 Plan, the Company granted 100,270 performance stock units (“PSUs”) to certain employees and, in February 2016, the Company granted 15,000 PSUs to one employee. Each PSU entitles the holder to receive, at the achievement of the performance-based and service-based criteria, a specified number of shares of the Company’s stock. Performance-based vesting criteria primarily relate to milestone events specific to the Company’s corporate goals, specifically regulatory development milestones related to the Company’s product candidates. Stock-based compensation expense associated with these PSUs is recognized if the performance condition is considered probable of achievement using management’s best estimates. As of June 30, 2016, these milestones were not probable and, therefore, no expense has been recognized related to these awards. No such awards were granted during the six months ended June 30, 2015.

2013 Employee Stock Purchase Plan

In June 2013, the Company’s Board of Directors adopted, and in July 2013 the Company’s stockholders approved, the 2013 Employee Stock Purchase Plan (the “2013 ESPP”). The 2013 ESPP is administered by the Company’s Board of Directors or by a committee appointed by the Company’s Board of Directors. Under the 2013 ESPP, each offering period is six months, at the end of which employees may purchase shares of common stock through payroll deductions made over the term of the offering period. The per-share purchase price at the end of each offering period is equal to 85% of the closing price of one share of the Company’s common stock at the beginning or end of the offering period, whichever is lower, subject to Internal Revenue Service limits. The Company issued 12,327 shares and 10,664 shares during the six months ended June 30, 2016 and 2015, respectively, under the 2013 ESPP. The Company did not issue any shares during the three months ended June 30, 2016 and 2015. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 327,272 shares of the Company’s common stock. As of June 30, 2016, the Company had 297,795 shares available for future issuance under the 2013 ESPP.

The Company recorded $0.2 million and $0.1 million of stock-based compensation expense for the three months ended June 30, 2016 and 2015, respectively, and $0.3 million and $0.2 million of stock-based compensation expense for the six months ended June 30, 2016 and 2015, respectively, related to the 2013 ESPP.

Stock-based compensation expense

During the three and six months ended June 30, 2016 and 2015, the Company recorded stock-based compensation expense for employee and non-employee stock options, restricted stock units, restricted stock, performance-based stock options, performance-based stock units and the employee stock purchase plan shares. Expenses related to these equity-based awards were allocated as follows in the condensed consolidated interim statements of operations (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Research and development expense	$	6,561	$	4,569	$	12,089	$	7,180
General and administrative expense		4,435		3,608		8,014		6,057

	$	10,996	$	8,177	$	20,103	$	13,237

The fair value of each stock option granted to employees is estimated on the date of grant using the Black-Scholes option-pricing model. For non-employees, the fair value of each stock option is estimated on each vesting and reporting date using the Black-Scholes option-pricing model. The following table summarizes the weighted average assumptions used in calculating the grant date fair value of the awards:


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Risk-free interest rate		1.38	%		1.71	%		1.41	%		1.71	%
Expected dividend yield		—			—			—			—
Expected term (in years)		5.89			5.88			6.04			6.03
Expected volatility		72.53	%		68.93	%		71.72	%		70.02	%

8. Income Taxes

In January 2014, the Company paid $6.0 million as payment in full of its U.S. federal income tax liability related to the year ended December 31, 2011, including $1.5 million of interest and penalties accrued. The Company filed a carryback claim to apply the net losses incurred during the year ended December 31, 2013 against the previous taxable income. The amount to be refunded by the Internal Revenue Service (“IRS”) was recorded as refundable income taxes as of December 31, 2014. During the three months ended March 31, 2015, the Company received the balance of the refundable income tax. There was no (benefit) provision for income taxes during the three and six months ended June 30, 2016 and 2015.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company evaluated whether any uncertain tax positions arise from commencing operations of its wholly owned subsidiary, Agios International Sarl, and determined no uncertain tax positions existed. As of June 30, 2016 and December 31, 2015, the Company did not have any uncertain tax positions.

9. Loss per Share

Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the dilutive net loss per share calculation, stock options, restricted stock units, unvested restricted stock and employee stock purchase plan options are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive; therefore, basic and diluted net loss per share were the same for all periods presented.

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three and Six Months Ended June 30,
	2016		2015
Stock options		5,383,189		4,687,805
Restricted stock units		66,300		25,000
Unvested restricted stock		—		2,841
Employee stock purchase plan options		15,917		3,941

		5,465,406		4,719,587

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Information

The following discussion of our financial condition and results of operations should be read with our unaudited condensed consolidated interim financial statements as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 and related notes included in Part I. Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors, included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission, or the SEC, on February 26, 2016. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of our management and include, without limitation, statements with respect to our expectations regarding our research, development and commercialization plans and prospects, results of operations, general and administrative expenses, research and development expenses, and the sufficiency of our cash for future operations. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar statements or variation of these terms or the negative of those terms and similar expressions are intended to identify these forward-looking statements. Readers are cautioned that these forward-looking statements are predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by our forward-looking statements are those discussed under the heading “Risk Factors” in Part II, Item 1A and elsewhere in this report. We undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We are a biopharmaceutical company committed to applying our scientific leadership in the field of cellular metabolism to transform the lives of patients with cancer and rare genetic metabolic disorders, or RGDs, which are a subset of orphan genetic metabolic diseases. Metabolism is a complex biological process involving the uptake and assimilation of nutrients in cells to produce energy and facilitate many of the processes required for cellular division and growth. We focus our efforts on using cellular metabolism, an unexploited area of biological research with disruptive potential, as a platform for developing potentially transformative small molecule medicines. Our most advanced cancer product candidates are AG-221 and AG-120, which target mutated isocitrate dehydrogenase 2 and 1, or IDH2 and IDH1, respectively, and AG-881, which targets both mutated IDH1 and mutated IDH2. These mutations are found in a wide range of hematological malignancies and solid tumors. The lead product candidate in our RGD programs, AG-348, targets pyruvate kinase-R for the treatment of pyruvate kinase deficiency. Pyruvate kinase deficiency is a rare disorder that often results in severe hemolytic anemia due to inherited mutations in the pyruvate kinase enzyme within red blood cells.

In April 2010, we entered into a discovery and development collaboration and license agreement, or the 2010 Agreement, with Celgene Corporation, or Celgene, focused on targeting cancer metabolism. The goal of the collaboration under the 2010 Agreement was to discover, develop and commercialize disease-altering therapies in oncology arising out of our cancer metabolism research platform that have achieved development candidate status. The discovery phase of the collaboration under the 2010 Agreement expired in April 2016.

Under the terms of the 2010 Agreement, we led research, preclinical and early development efforts through phase 1, while Celgene received an option to obtain exclusive rights either upon Investigational New Drug application, or IND, acceptance or at the end of phase 1 to further develop and commercialize medicines emerging from our cancer metabolism research. Celgene led and funded global development and commercialization of development candidates for which it exercised its option to obtain a co-commercialization license, and we retained development and commercialization rights in the United States for development candidates for which we exercised our option to retain a split license. On all programs under the 2010 Agreement for which Celgene exercised its option, we are eligible to receive up to $120.0 million in milestone-based payments as well as royalties on any sales.

We nominated AG-221 and AG-120 during the discovery phase of the collaboration under the 2010 Agreement. In June 2014, Celgene exercised its exclusive option to license worldwide development and commercialization rights for AG-221. In addition to contributing our scientific and translational expertise, we continue to conduct certain clinical development and regulatory activities within the AG-221 development program while transitioning responsibilities to Celgene, which will lead later development activities. Celgene exercised its exclusive option under the 2010 Agreement to license development and commercialization rights to AG-120 outside the United States during the three months ended March 31, 2015. Following Celgene’s exercise of this option, we retained development and commercialization rights for AG-120 in the United States.

During April 2015, we selected a third novel IDH mutant inhibitor, AG-881, for clinical development. On April 27, 2015, we entered into a joint worldwide development and profit share collaboration and license agreement with Celgene and our wholly owned subsidiary, Agios International Sarl, which was organized in Switzerland in April 2015, entered into a collaboration and license agreement with Celgene International II Sarl. We refer to these agreements collectively as the AG-881 Agreements. The AG-881 Agreements establish a worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, we received initial upfront payments totaling $10.0 million in May 2015 and are eligible to receive up to $70.0 million in milestone-based payments. We and Celgene will equally split all worldwide development costs, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.

In May 2016, we entered into a master research and collaboration agreement, or the 2016 Agreement, with Celgene and Celgene RIVOT Ltd., a wholly owned subsidiary of Celgene. The 2016 Agreement establishes a new global collaboration focused on the research and development of immunotherapies against certain metabolic targets that exert their antitumor efficacy primarily via the immune system. In addition to new programs identified under the 2016 Agreement, Celgene and we have also agreed that all future development and commercialization of two programs that were conducted under the 2010 Agreement will now be governed by the 2016 Agreement.

During the research term of the 2016 Agreement, we plan to conduct research programs focused on discovering compounds that are active against metabolic targets in the immuno-oncology, or IO, field. The initial four-year research term will expire on May 17, 2020. Celgene may extend the research term for up to two, or in specified cases, up to four, additional one-year terms.

For each program under the 2016 Agreement, we may nominate compounds that meet specified criteria as development candidates, and, in limited circumstances, Celgene may also nominate compounds as development candidates for each such program. Celgene may designate the applicable program for further development following any such nomination, after which we may conduct, at our expense, additional pre-clinical and clinical development for such program through completion of an initial phase 1 dose escalation study.

At the end of the research term, Celgene may designate for continued development up to three research programs for which development candidates have yet to be nominated, which we refer to as continuation programs. We may conduct further research and pre-clinical and clinical development activities on any continuation program, at our expense, through completion of an initial phase 1 dose escalation study.

We have granted Celgene the right to obtain exclusive options to development and commercialization rights for each program that Celgene has designated for further development, and for each continuation program. Celgene may exercise each such option beginning upon the designation of a development candidate for such program (or upon the designation of such program as a continuation program) and ending on the earlier of (i) the end of a specified period after we have furnished Celgene with specified information about the initial phase 1 dose escalation study for such program, or (ii) January 1, 2030. Research programs that have applications in the inflammation or autoimmune, or I&I, field that may result from the 2016 Agreement will also be subject to the exclusive options described above.

We will retain rights to any program that Celgene does not designate for further development or as to which Celgene does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, we and Celgene will enter into either a co-development and co-commercialization agreement if such program is in the IO field, or a license agreement if such program is in the I&I field. Under each co-development and co-commercial agreement, we and Celgene will co-develop and co-commercialize licensed products worldwide. Either we or Celgene will lead development and commercialization of licensed products for the United States and Celgene will lead development and commercialization of licensed products outside of the United States. Depending on the country, we and Celgene will each have the right to provide a portion of field-based marketing activities. Under each license agreement, Celgene will have the sole right to develop and commercialize licensed products worldwide. We will retain rights to any program that Celgene does not designate for further development or as to which Celgene does not exercise its option.

Subsequent to the execution of the 2016 Agreement, Celgene and we agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which AG-120 is the lead development candidate. Under the 2010 Agreement, Celgene had held development and commercialization rights to the IDH1 program outside of the United States, and we held such rights inside the United States. As a result of the termination, we will obtain global rights to AG-120 and the IDH1 program. Neither party will have any financial obligation, including royalties or milestone payments, to the other concerning

AG-120 or the IDH1 program after final reconciliation of specified shared development costs. Under the terms of the termination, the parties are released from their exclusivity obligations under the 2010 Agreement with respect to the IDH1 program. The AG-120 termination does not alter our global collaboration with Celgene pursuant to the AG-881 Agreements concerning AG-881, which is directed at both the IDH1 target and the IDH2 target.

Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies and conducting clinical trials. To date, we have financed our operations primarily through funding received from the 2010 Agreement, the AG-881 Agreements, the 2016 Agreement, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene and our follow-on public offerings. Substantially all of our revenue to date has been collaboration revenue received from Celgene.

Since inception, we have incurred significant operating losses. Our net loss was $56.0 million and $31.9 million, for the three months ended June 30, 2016 and 2015, respectively, and $79.2 million and $36.9 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, we had an accumulated deficit of $363.8 million. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from year to year. We anticipate that our expenses will increase significantly as we continue to advance and expand clinical development activities for our lead programs, AG-221, AG-120, AG-881 and AG-348, as well as AG-519 our second product candidate that is a potent activator of the PKR enzyme; continue to discover and validate novel targets and drug product candidates; expand and protect our intellectual property portfolio; and hire additional commercial, development and scientific personnel.

Financial Operations Overview

Revenue

Through June 30, 2016, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the near future. Primarily all of our revenue to date has been derived from our collaborations with Celgene. In the future, we will seek to generate revenue from a combination of product sales and upfront payments, cost reimbursements, milestone payments, and royalties on future product sales.

Collaboration and license revenue

Arrangement consideration is allocated to each separately identified unit of accounting based on the relative selling price, using our best estimate of selling price of each deliverable. The provisions of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 605-25, Multiple-Element Arrangements are then applied to each unit of accounting to determine the appropriate revenue recognition. In the event that a deliverable of a multiple element arrangement does not represent a separate unit of accounting, we recognize revenue from the combined units of accounting over the term of the related contract or as undelivered items are delivered, as appropriate.

Revenue is recognized under the proportional performance method for certain units of accounting. The amount recognized is determined based on the consideration allocated to each unit of accounting based on the ratio of the level of effort incurred to date compared to the total estimated level of effort required to complete our performance obligations under the unit of accounting. Determining the total estimated level of effort required to complete all performance obligations requires management judgment and estimation, including assumptions regarding future operating performance, the timelines of the clinical trial approvals and the estimated patient populations.

Reimbursement of research and development costs by Celgene is recognized as revenue, provided we have determined that we are acting primarily as a principal in the transaction according to the provisions outlined in ASC 605-45, Revenue Recognition – Principal Agent Considerations, the amounts are determinable and collection of the related receivable is reasonably assured.

Milestone revenue

We recognize revenue contingent upon the achievement of a milestone in its entirety in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered substantive. At the inception of each arrangement that includes milestone payments, we evaluate each contingent payment on an individual basis to determine whether they are considered substantive milestones, specifically reviewing factors such as the degree of certainty in achieving the milestone, the research and development risk and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

Revenue from milestones, if they are nonrefundable and deemed substantive, are recognized upon achievement of the milestones. We recognize revenue associated with the non-substantive milestones upon achievement of the milestone if there are no undelivered elements and we have no remaining performance obligations.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

•

employee-related expenses including salaries, benefits and stock-based compensation expense;

•

expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research and development and both preclinical and clinical activities on our behalf and the cost of consultants;

•

the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; and

•

facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other operating costs.

Research and development costs are expensed as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Reimbursements received from Celgene for certain third-party costs for which we are not the principal in the transaction according to the provisions of ASC 605-45 are recorded as a reduction to research and development expense.

The following summarizes our most advanced current research and development programs.

AG-221: lead IDH2 program

AG-221 is an orally available, selective, potent inhibitor of the mutated IDH2 protein, making it a highly targeted therapeutic candidate for the treatment of patients with cancers that harbor IDH2 mutations, including those with acute myeloid leukemia, or AML, who have a historically poor prognosis. On June 16, 2014, the U.S. Food and Drug Administration, or FDA, granted us orphan drug designation for AG-221 for treatment of patients with AML. On August 13, 2014, we announced that the FDA granted fast track designation to AG-221 for treatment of patients with AML that harbor an IDH2 mutation. In April 2016, we and Celgene received European Medicines Agency, or EMA, Orphan Drug Designation for AG-221 for the treatment of AML. We have been evaluating AG-221 in several phase 1 dose-escalation clinical trials evaluating both hematological and solid tumor cancers with IDH2 mutations. To date, all clinical data reported by us in hematological cancers highlights that the mechanism of response is consistent with preclinical studies, including substantial reduction of plasma 2-hydroxygluturate, or 2HG, levels, as well as evidence of cellular differentiation and normalization of cell counts in the bone marrow and blood. This differentiation effect is distinct from that seen with traditional chemotherapeutics commonly used to treat AML.

In September 2013, we initiated our first phase 1 multicenter, open-label, dose-escalation clinical trial to assess the safety, clinical activity, and tolerability of AG-221 in patients with advanced hematologic malignancies with an IDH2 mutation. In June 2014, Celgene exercised its option to an exclusive global license for development and commercialization of AG-221 under a collaboration agreement between us and Celgene, which focuses on cancer metabolism, or the 2010 Agreement. Under the 2010 Agreement, Celgene is responsible for all development costs for AG-221. We are eligible to receive up to $120.0 million in milestone payments and a tiered royalty on any net sales of products containing AG-221. In January 2016, in conjunction with the initiation of AG-221 phase 3 trials we received a milestone payment of $25.0 million. We also have the right to conduct a portion of any commercialization activities for AG-221 in the United States. In addition to contributing our scientific and translational expertise, we will continue to conduct some clinical development and regulatory activities within the AG-221 development program in collaboration with Celgene.

In October 2014, we initiated four expansion cohorts in our ongoing phase 1 clinical trial of AG-221 in patients with IDH2 mutant-positive hematologic malignancies to assess the safety and tolerability of AG-221 at 100 mg once daily oral dose in approximately 100 patients with IDH2 mutant-positive hematologic malignancies, including AML. In the expansion cohorts, we evaluated relapsed or refractory AML patients 60 years of age and older, relapsed or refractory AML patients under age 60, untreated AML patients who decline standard of care chemotherapy and patients with other IDH2 mutant-positive advanced hematologic malignancies.

In May 2015, we announced that our ongoing phase 1 clinical trial of AG-221 had been expanded to add an additional more homogenous cohort of 125 patients with IDH2 mutant-positive AML who are in second or later relapse, are refractory to second-line

induction or reinduction treatment, or have relapsed after allogeneic transplantation. Consistent with the previous expansion cohorts, AG-221 is administered at a dose of 100 mg once daily. The primary objectives of the trial are to confirm the safety and clinical activity of AG-221 in a select, highly resistant AML population. Enrollment of the expansion cohorts has been completed.

In October 2015, Celgene, in collaboration with us, initiated IDHENTIFY, an international phase 3, multi-center, open-label, randomized clinical trial designed to compare the efficacy and safety of AG-221 versus conventional care regimens in patients 60 years or older with IDH2 mutant-positive AML that is refractory to or relapsed after second- or third-line therapy.

In December 2015, we reported additional clinical data, as of September 1, 2015, from the dose escalation phase and expansion cohorts of the ongoing phase 1 clinical trial, which was transitioned to a phase 1/2 trial in May 2015, evaluating single agent AG-221, which included 209 response-evaluable enrolled patients with IDH2 mutant-positive AML. The new data were presented at the 2015 American Society of Hematology (ASH) Annual Meeting and Exposition in Orlando, Florida and showed investigator-assessed objective responses in 79 out of 209 response-evaluable patients. Of the 79 patients who achieved an objective response, there were 37 complete remissions (CR), three complete remissions with incomplete platelet recovery (CRp), 14 marrow complete remissions (mCR), three complete remissions with incomplete hematologic recovery (CRi) and 22 partial remissions (PR). A CR is determined by using well-established criteria, which requires no evidence of leukemia in the bone marrow and blood accompanied by full restoration of all blood counts to normal ranges. A CRp means all the criteria for CR are met except that platelet counts are outside of the normal range. Platelets are one of the three major types of blood cells. A mCR means that there is no evidence for leukemia in the marrow but the blood counts have not fully restored. A CRi means there is no evidence for leukemia in the marrow but the neutrophils, a subset of white blood cells responsible for fighting bacterial infections, are outside the normal range. A partial response means all the criteria for CR are met except that the immature defective blood cells, or leukemia, in the bone marrow are in the 5% to 25% range and have been decreased by at least 50% over pretreatment. Of the 159 patients with relapsed or refractory AML, 59 achieved an objective response, including 29 CRs, one CRp, nine mCRs, three CRis and 17 PRs. Of the 24 patients with AML who declined standard of care chemotherapy, 10 achieved an objective response, including four CRs, one CRp, one mCR and four PRs. Of the 14 patients with MDS, seven achieved an objective response, including three CRs, one CRp and three mCRs. Responding relapsed or refractory AML patients were on the trial for up to 18 months with a median duration of treatment of 6.8 months, ranging from 1.8 to 18 months. Responses were durable, with median response duration of 6.9 months in patients with relapsed or refractory AML. A safety analysis was conducted for all 231 treated patients. The majority of adverse events, or AEs, reported by investigators were mild to moderate, with the most common being nausea, diarrhea, fatigue and febrile neutropenia. The serious adverse events, or SAEs, observed during the trial were mainly disease related. Twenty-three percent of patients had treatment-related SAEs, including notably differentiation syndrome (4 percent), leukocytosis (4 percent) and nausea (2 percent). Drug-related Grade 5 SAEs included atrial flutter (one patient), cardiac tamponade (one patient), pericardial effusion (one patient) and respiratory failure (one patient). Dose escalation has been completed and a maximum tolerated dose, or MTD, has not been reached. AG-221 continued to show favorable drug exposure and pharmacokinetics at all doses tested with substantial reductions in plasma levels of 2HG, which is produced by the mutated IDH2 and IDH1 proteins, to the level observed in healthy volunteers. In 2016, Celgene, in collaboration with us, intends to initiate an expansion arm of our phase 1/2 clinical trial, evaluating AG-221 in high-risk MDS patients.

Also in December 2015, we announced the initiation of a phase 1b, multicenter, international, open-label clinical trial to evaluate the safety and clinical activity of AG-221 or AG-120 in combination with induction and consolidation therapy in patients with newly diagnosed AML with an IDH2 or IDH2 mutation who are eligible for intensive chemotherapy. The trial will evaluate continuous dosing for up to one year with AG-221 administered at an initial oral dose of 100 mg once daily in patients with an IDH2 mutation or AG-120 administered at an initial oral dose of 500 mg once daily in patients with an IDH1 mutation. AG-221 or AG-120 will be administered with two types of AML induction therapies (cytarabine with either daunorubicin or idarubicin) and two types of AML consolidation therapies (mitoxantrone with etoposide [ME] or cytarabine).

In March 2016, Celgene, in collaboration with us, initiated a phase 1/2 frontline combination clinical trial, to be conducted by Celgene, of either AG-221 or AG-120 in combination with VIDAZA^® (azacitidine) in newly diagnosed AML patients not eligible for intensive chemotherapy, with a phase 1 component to determine the safety of the combinations, followed by a phase 2 randomized component evaluating the safety and clinical activity of each investigational combination versus single-agent VIDAZA^® using a primary endpoint of overall response rate.

Celgene maintains worldwide development and commercial rights to AG-221 and Celgene will fund the future development and commercialization costs related to this program.

AG-120: lead IDH1 program

AG-120 is an orally available, selective, potent inhibitor of the mutated IDH1 protein, making it a highly targeted therapeutic candidate for the treatment of patients with cancers that harbor IDH1 mutations. Mutations in IDH1 have been identified in difficult to treat hematologic and solid tumor cancers, including AML, chondrosarcoma and cholangiocarcinoma where both the treatment options and prognosis for patients are poor. In March 2014, we initiated two phase 1, multicenter, open-label, dose-escalation and expansion clinical trials for AG-120, one designed to assess the safety, clinical activity and tolerability of AG-120 as a single agent in patients with advanced hematologic malignancies and the second designed to evaluate the safety, clinical activity and tolerability of AG-120 in patients with advanced solid tumors. Both trials are only enrolling patients that carry an IDH1 mutation. On May 18, 2015, we announced that the FDA granted fast track designation to AG-120 for treatment of patients with AML that harbor an IDH1 mutation. On June 10, 2015, the FDA granted us orphan drug designation for AG-120 for treatment of patients with AML.

Four expansion cohorts have been added to the ongoing phase 1 clinical trial of AG-120 in patients with advanced hematologic malignancies. These four expansion cohorts will evaluate AG-120 in 200 patients with IDH1 mutant-positive advanced hematologic malignancies. The first cohort will evaluate a more homogenous population of 125 AML patients who are in second or later relapse, are refractory to second-line induction or reinduction treatment, or have relapsed after allogeneic transplantation. The second cohort will evaluate 25 untreated AML patients. The third cohort will evaluate 25 patients with other non-AML IDH1 mutant-positive relapsed or refractory advanced hematologic malignancies. The fourth cohort will evaluate patients with relapsed IDH1 mutant-positive AML not eligible for the first arm or standard of care chemotherapy. AG-120 is administered at a 500 mg once daily oral dose, in 28-day cycles. The trial’s primary objectives are to confirm the safety and clinical activity of AG-120.

In November 2015, we reported clinical data from the dose-escalation portion of our ongoing phase 1 clinical trial evaluating AG-120 in patients with IDH1 mutant-positive advanced solid tumors, including glioma, intrahepatic cholangiocarcinoma, or IHCC, and chondrosarcomas who received AG-210 administered from 200 mg to 1200 mg total daily doses. The data were presented at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics in Boston. As of the September 3, 2015 data cut-off, 62 patients had been treated with single agent AG-120, of which 55 were response-evaluable. Seven of the 11 response-evaluable patients with IDH1 mutant-positive chondrosarcoma had stable disease, with five of these patients maintaining stable disease for six months or more. One of the 20 patients with IDH1 mutant-positive IHCC had a partial response and 11 patients had stable disease, with six such patients maintaining stable disease for six months or more. Ten of the 20 patients with IDH1 mutant-positive glioma had stable disease, with four of these patients maintaining stable disease for six months or more. One of the four patients with other IDH1 mutant-positive solid tumors had stable disease. Treatment with AG-120 showed substantial reduction of 2HG in plasma and tumor tissue, and imaging results suggest that AG-120 can lower 2HG levels in the brain. AG-120 was well tolerated, with the majority of AEs reported by investigators being mild to moderate. The most common investigator-reported AEs were nausea, diarrhea, vomiting, anemia and QT prolongation. The majority of reported SAEs were disease related. A MTD has not been reached. We are currently enrolling four expansion cohorts of 25 patients each in (i) low grade glioma with at least six months of prior scans to assess volumetric changes, (ii) second-line cholangiocarcinoma, (iii) high grade, or metastatic, chondrosarcoma, and (iv) other solid tumors with an IDH1 mutation, who will receive the recommended dose of 500 mg of AG-120 once daily.

In December 2015, we reported new data, as of October 1, 2015, from the ongoing phase 1 clinical trial evaluating single agent AG-120, which included 87 enrolled patients with IDH1 mutant-positive advanced hematologic malignancies, of which 78 were from the dose-escalation phase and nine were from the expansion phase. The data were presented at the 2015 ASH Annual Meeting and Exposition in Orlando, Florida and showed investigator-assessed objective responses in 27 out of 78 response-evaluable patients on AG-120. Of the 27 patients who achieved an objective response, there were 12 CRs, seven CRps, six mCRs, one CRi and one PR. Patients were on the trial treatment for up to 14.1 months, with a median duration of treatment of 2.9 months, ranging from 0.1 to 14.1 months. Data continued to show durable clinical activity for AG-120, with responses maintained for up to 12.5 months and a median duration of response of 5.6 months. AG-120 continued to show favorable drug exposure and pharmacokinetics at all doses tested and also substantially reduced plasma levels of 2HG to the level observed in healthy volunteers. The mechanism of response is consistent with differentiation, as evidenced by the maturation of the leukemic cells into infection fighting white blood cells, or neutrophils. The majority of AEs reported by investigators were mild to moderate, with the most common being fatigue, diarrhea, pyrexia and nausea. A MTD has not been reached, and dose escalation is now complete.

As described above, in December 2015, we announced the initiation of a phase 1b, multicenter, international, open-label clinical trial of AG-221 or AG-120 in combination with induction and consolidation therapy in patients with newly diagnosed AML with an isocitrate dehydrogenase (IDH) mutation who are eligible for intensive chemotherapy. Also as described above, in the March 2016, Celgene, in collaboration with us, initiated a phase 1/2 frontline combination clinical trial, to be conducted by Celgene, of either AG-221 or AG-120 in combination with VIDAZA^® (azacitidine) in newly diagnosed AML patients not eligible for intensive chemotherapy, with a phase 1 component to determine the safety of the combinations, followed by a phase 2 randomized component evaluating the safety and clinical activity of each investigational combination versus single-agent VIDAZA^® using a primary endpoint of overall response rate.

We intend to initiate a global registration-enabling phase 3 clinical trial in frontline AML patients who harbor an IDH1 mutation in the first half of 2017. In addition, we intend to initiate a randomized phase 2 clinical trial of AG-120 in patients with IDH1 mutant-positive cholangiocarcinoma in the second half of 2016.

As described above, Celgene and we agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which AG-120 is the lead development candidate. Under the 2010 Agreement, Celgene had held development and commercialization rights to the IDH1 program outside of the United States, and we held such rights inside the United States. As a result of the termination, we will obtain global rights to AG-120 and the IDH1 program and expect to fund the future development and commercialization costs related to the program. Neither party will have any financial obligation, including royalties or milestone payments, to the other concerning AG-120 or the IDH1 program after final reconciliation of specified shared development costs.

AG-881: pan-IDH program

AG-881 is an orally available, selective, brain-penetrant, pan-IDH mutant inhibitor, which provides added flexibility to our current portfolio of IDH mutant inhibitors. AG-881 successfully completed IND-enabling studies in April 2015. We and Celgene are jointly collaborating on a worldwide development program, wherein we share worldwide development costs and profits and Celgene would book any worldwide commercial sales. We will lead commercialization in the United States with both companies sharing equally in field-based commercial activities, and Celgene will lead commercialization outside of the United States with us providing one third of field-based commercial activities in the major EU markets.

We are conducting phase 1 multi-center, open-label clinical trials of AG-881, one in patients with advanced IDH1 or IDH2 mutant-positive solid tumors, including glioma, and the other in patients with advanced IDH1 or IDH2 mutant-positive hematologic malignancies whose cancer has progressed on a prior IDH inhibitor therapy. The goal of these trials is to evaluate the safety, pharmacokinetics, pharmacodynamics and clinical activity of AG-881 in advanced solid tumors and hematologic malignancies, respectively. In each trial, AG-881 will be administered continuously as a single agent dosed orally in a 28-day cycle. The first portion of each trial includes a dose-escalation phase in which cohorts of patients will receive ascending oral doses of AG-881 to determine the maximum tolerated dose and/or the recommended phase 2 dose based on safety and tolerability. The second portion of each trial is a dose expansion phase where patients will receive AG-881 to further evaluate the safety, tolerability and clinical activity of the recommended phase 2 dose.

AG-348: lead pyruvate kinase deficiency program

AG-348 is an orally available small molecule and a potent activator of the wild-type (normal) and mutated PKR enzyme, which has resulted in restoration of ATP levels and a decrease in 2,3-DPG (2,3-diphosphoglycerate) levels in blood sampled from patients with PK deficiency in nonclinical studies. The wild-type PKR activity of AG-348 allowed the study of enzyme activation in healthy volunteers, providing an opportunity to understand the safety, dosing and pharmacodynamic activity of AG-348 prior to entering a proof-of-concept study in patients. On March 24, 2015, the FDA granted us orphan drug designation for AG-348 for treatment of patients with PK deficiency.

In June 2015, we initiated DRIVE PK, a global phase 2, first-in-patient, open-label safety and efficacy clinical trial of AG-348 in adult, transfusion-independent patients with PK deficiency. The multi-center, randomized trial includes two arms with 25 patients each. The patients in the first arm receive 50 mg twice daily, and the patients in the second arm receive 300 mg twice daily. The trial includes a six-month dosing period with the opportunity for continued treatment beyond six months based on safety and clinical activity.

In June 2016, we reported the first clinical data from DRIVE PK at the 21^st Congress of the European Hematology Association (EHA) in Copenhagen, Denmark. These data established proof of concept for AG-348 as a novel, first-in-class, oral activator of both wild-type and mutated PKR enzymes. Results presented were as of the March 27, 2016 data cut-off and were from 18 transfusion independent patients treated with twice-daily dosing for up to six months. The data showed that AG-348 was well tolerated, and no patients discontinued treatment early. The majority of AEs were mild to moderate and transient. One patient received a dose reduction due to rapidly increasing hemoglobin. This patient was dose-reduced from 300 mg to 50 mg and remained on study. One Grade 2 AE of osteoporosis was reported after the cut-off date. This patient had osteopenia at baseline assessment. Sex steroids were assessed at baseline, week 12 and week 24. Free testosterone and estradiol were available for four and five male patients, respectively. An upward trend in free testosterone and a downward trend in estradiol were observed in these patients. Due to the small number of female patients with hormone data, only data from male patients were reported. Additional data and longer follow up are needed to determine if hormonal changes are clinically significant. In the study, nine of 18 patients, including nine of 13 patients with at least one missense

mutation, demonstrated robust, rapid and sustained increases in hemoglobin as evidenced by an increase in hemoglobin of greater than 1.0 g/dL. Both doses of AG-348 demonstrated clinical activity, with four patients in the 50 mg group and five patients in the 300 mg group experiencing increases of greater than 1.0 g/dL. In patients who had hemoglobin increases of greater than 1.0 g/dL, the mean maximum hemoglobin increase was 3.4 g/dL (range 2.3–4.9 g/dL). The median time to a hemoglobin increase of >1.0 g/dL was 1.9 weeks (range 1.1–9.1 weeks). None of the five patients with two non-missense mutations showed increases in hemoglobin of greater than 1.0 g/dL. Further data are needed to obtain a greater understanding of the relationship between genotype and response. Additionally, pharmacokinetics was favorable and consistent with those observed in healthy volunteers. Pharmacodynamics data did not demonstrate a correlation with hemoglobin increases and ATP elevation. More data are needed to clarify if any correlation exists between 2,3-DPG (2,3-diphosphoglycerate) decreases and Hb increases of greater than 1.0 g/dL. Enrollment for this trial is ongoing.

We have worldwide development and commercial rights to AG-348 and expect to fund the future development and commercialization costs related to this program.

AG-519: a second novel PKR activator

AG-519 is an orally available small molecule and our second product candidate that is a potent activator of the PKR enzyme. We initiated a placebo-controlled phase 1 clinical trial of AG-519 in healthy volunteers in the first quarter of 2016. This trial is an integrated single ascending dose, or SAD, and multiple ascending dose, or MAD, trial.

In June 2016, we reported the first clinical data from this trial at EHA in Copenhagen. These results provided proof-of-mechanism for AG-519, a potent, oral, selective PKR activator. In the SAD portion of the trial, four cohorts with doses of AG-519 ranging from 50 mg to 1250 mg were tested against placebo in 32 healthy volunteers and demonstrated a favorable safety profile in all doses tested. There were no SAEs reported, and all AEs were mild to moderate, with the most common being headache. In addition, there were no early discontinuations due to AG-519 and the maximum tolerated dose was not reached. Mean decreases in blood 2,3-DPG levels, up to 43 percent from baseline were observed in the SAD cohorts, reaching minimum levels after 24 hours. As expected, ATP levels did not change after a single dose of AG-519, consistent with phase 1 SAD findings from AG-348. Healthy volunteers receiving placebo showed no changes in 2,3-DPG or ATP levels. In the MAD portion of the trial, the first two cohorts reported data from 16 healthy volunteers dosed twice daily with 125 mg or 375 mg of AG-519 or placebo for 14 days. There were no SAEs reported, with all AEs being mild to moderate, and the most common being headache. One subject receiving AG-519 at the 375 mg dose experienced a low blood platelet count (Grade 2 thrombocytopenia) on Day 14. Platelet levels started to recover within five days of the last dose and returned to normal levels seven days after the last dose. Since the EHA data presentation, three additional cohorts of healthy volunteers have been dosed with AG-519 in the MAD portion of the trial, in which there have been no additional reported cases of low blood platelet count. Pharmacodynamic data from these MAD cohorts showed a mean decrease of up to 47 percent in blood 2,3-DPG levels and a mean increase of up to 62 percent in blood ATP levels from baseline. In contrast, healthy volunteers receiving placebo showed no changes in 2,3-DPG or ATP levels. Subjects treated with AG-519 exhibited no significant changes in sex steroids levels, consistent with a lack of aromatase enzyme inhibition. Enrollment into additional MAD cohorts is ongoing.

We have worldwide development and commercial rights to AG-519 and expect to fund the future development and commercialization costs related to this program.

Other research and platform programs

Other research and platform programs include activities related to exploratory efforts, target validation and lead optimization for our discovery and follow-on programs and our proprietary metabolomics platform.

We use our employee and infrastructure resources across multiple research and development programs, and we allocate internal employee-related and infrastructure costs, as well as certain third-party costs, net of reimbursements from Celgene, to each of these programs based on the personnel resources allocated to such program. Our research and development expenses, by major program, are outlined in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2016		2015		2016		2015
IDH2 inhibitor (AG-221)	$	2,079	$	2,258	$	4,277	$	5,587
IDH1 inhibitor (AG-120)		20,572		12,444		33,699		22,861
Pan IDH inhibitor (AG-881)		3,129		3,441		6,131		7,314
PKR activator (AG-348)		5,099		4,607		10,191		9,678
PKR activator (AG-519)		4,737		2,074		9,542		2,687
Other research and platform programs		15,188		11,599		31,002		20,739

Total research and development expenses, net	$	50,804	$	36,423	$	94,842	$	68,866

Research and development expenses for AG-221 for the three months ended June 30, 2016 and 2015 are net of $0.7 million and $1.1 million, respectively, and the six months ended June 30, 2016 and 2015 are net of $1.2 million and $5.5 million, respectively, in reimbursement of certain third-party costs under the 2010 Agreement, as amended, which are classified as a reduction of research and development expense.

Research and development expenses for AG-120 for the three and six months ended June 30, 2016 are net of $3.3 million and $9.9 million, respectively and for the three and six months ended June 30, 2015 are net of $2.6 million in reimbursement of certain third-party and internal costs under the 2010 Agreement, as amended, which are classified as a reduction of research and development expense.

Research and development expenses for AG-881 for the three and six months ended June 30, 2016 are net of $1.9 million and $3.6 million, respectively and for the three and six months ended June 30, 2015, are net of $0.8 million in reimbursement of certain third-party and internal costs under the AG-881 Agreements, which are classified as a reduction of research and development expense.

The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from AG-221, AG-120, AG-881, AG-348, AG-519 or any of our other product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:

•

establishing an appropriate safety profile with IND and/or NDA enabling toxicology studies;

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successful enrollment in, and completion of, clinical trials;

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receipt of marketing approvals from applicable regulatory authorities;

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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

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launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and

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maintaining an acceptable safety profile of the products following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development, legal and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services.

We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses.

Critical Accounting Policies and Estimates

Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our consolidated financial statements. Management has determined that our most critical accounting policies are those relating to revenue recognition, accrued research and development expenses and stock-based compensation. There have been no significant changes to our critical accounting policies discussed in the Annual Report on Form 10-K for the year ended December 31, 2015.

Results of Operations

Comparison of three months ended June 30, 2016 and 2015

The following table summarizes our results of operations for the three months ended June 30, 2016 and 2015, together with the changes in those items in dollars and as a percentage:


	Three Months Ended June 30,
(in thousands)	2016			2015			Dollar Change			% Change
Collaboration revenue – related party	$	6,978		$	13,219		$	(6,241	)		(47	)%
Operating expenses:
Research and development (net of $5,922 and $4,546 of cost reimbursement from related party for the three months ended June 30, 2016 and 2015, respectively)		50,804			36,423			14,381			39
General and administrative		12,644			8,929			3,715			42

Loss from operations		(56,470	)		(32,133	)		(24,337	)		76
Interest income		517			236			281			119

Net loss	$	(55,953	)	$	(31,897	)	$	(24,056	)		75	%

Revenue. In April 2015, we entered into the AG-881 Agreements with Celgene upon which we received additional consideration and were required to evaluate the 2010 Agreement and AG-881 Agreements under the current revenue recognition accounting guidance resulting in additional revenue being recognized. For the three months ended June 30, 2015, we recognized $13.2 million in revenue under the new accounting guidance, which includes the recognition of $8.8 million related to the delivery of U.S and ex-U.S. licenses for AG-881.

In May 2016, we entered into the 2016 Agreement with Celgene upon which we received a $200.0 million upfront payment and which required us to reevaluate the 2010 Agreement, AG-881 Agreements and the 2016 Agreement under the current revenue recognition accounting guidance. In addition, in May 2016, Celgene and we agreed to terminate the 2010 Agreement as to the AG-120 program. For the three months ended June 30, 2016, we recognized $7.0 million in revenue under the new accounting guidance, which includes $3.9 million related to new deliverables identified under the 2016 Agreement and does not include any revenue associated with the AG-120 program after the 2016 amendment date.

Research and Development Expense. The increase in research and development expenses was primarily attributable to net increases of $6.9 million in external services and $7.5 million in internal expenses; both of these increases are inclusive of $5.9 million in reimbursement of certain costs related to AG-221, AG-120 and AG-881, which are recorded as a reduction of research and development expenses. During the three months ended June 30, 2016 and 2015, we recognized certain cost reimbursements related to our on-going development activities under our IDH programs for which we are no longer acting as the principal in the transaction as a reduction of research and development expenses.

The increase in external services in 2016 was attributable to the following:

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increases of approximately $0.8 million and $2.9 million for external clinical studies and manufacturing activities for our lead product candidates AG-221 and AG-120, respectively, offset by decreases of approximately $0.2 million and $0.8 million for external clinical studies and manufacturing activities for our lead product candidates AG-348 and AG-881, respectively;

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an increase of approximately $0.9 million for preclinical and clinical studies for our product candidate AG-519; and

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an increase of approximately $3.3 million for costs related to other early research and platform programs.

We incurred approximately $7.5 million of additional internal research and development expenses related to the following:

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an increase of $6.4 million in personnel costs related to an increase in our internal headcount of 46%, which includes an increase of $2.0 million in stock-based compensation expense; and

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an increase of approximately $1.1 million for facilities and other related expenses.

General and Administrative Expense. The increase in general and administrative expenses was primarily attributable to the following:

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an increase of $2.1 million in personnel costs related to an increase in our internal headcount of 42% which includes an increase of $0.8 million for stock-based compensation expense;

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an increase of $1.3 million in professional service costs and insurance costs; and

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an increase of $0.3 million in certain operating expenses, including consulting and facility costs.

Interest Income. The increase is attributable to a more diversified investment portfolio, resulting in higher interest earned on investments.

Provision for Income Tax. We did not have a provision for income taxes during the three months ended June 30, 2016 or 2015 due to our net loss.

Comparison of six months ended June 30, 2016 and 2015

The following table summarizes our results of operations for the six months ended June 30, 2016 and 2015, together with the changes in those items in dollars and as a percentage:


	Six Months Ended June 30,
(in thousands)	2016			2015			Dollar Change			% Change
Collaboration revenue – related party	$	38,259		$	47,421		$	(9,162	)		(19	)%
Operating expenses:
Research and development (net of $14,716 and $8,912 of cost reimbursement from related party for the six months ended June 30, 2016 and 2015, respectively)		94,842			68,866			25,976			38
General and administrative		23,481			15,883			7,598			48

Loss from operations		(80,064	)		(37,328	)		(42,736	)		114
Interest income		913			474			439			93

Net loss	$	(79,151	)	$	(36,854	)	$	(42,297	)		115	%

Revenue. In April 2015, we entered into the AG-881 Agreements with Celgene upon which we received additional consideration and were required to evaluate the 2010 Agreement and AG-881 Agreements under the current revenue recognition accounting guidance resulting in additional revenue being recognized. For the six months ended June 30, 2015, we recognized $47.4 million in revenue under the new accounting guidance, which includes approximately $4.8 million related to the delivery of certain AG-120 studies, $8.8 million related to the delivery of U.S and ex-U.S. licenses for AG-881 and $15.8 million related to the delivery of an ex. U.S. license for AG-120.

In May 2016, we entered into the 2016 Agreement with Celgene upon which we received a $200.0 million upfront payment and required us to reevaluate the 2010 Agreement, AG-881 Agreements and the 2016 Agreement under the current revenue recognition accounting guidance. In addition, in May 2016, the Celgene and we agreed to terminate the 2010 Agreement as to the AG-120 program. For the six months ended June 30, 2016, we recognized $38.3 million in revenue under the new accounting guidance, which includes $3.9 million related to new deliverables identified under the 2016 Agreement and does not include any revenue associated with the AG-120 program after the 2016 amendment date. In addition, during the three months ended March 31, 2016, we recognized a $25.0 million milestone payment related to a substantial clinical development milestone achieved.

Research and Development Expense. The increase in research and development expenses was primarily attributable to net increases of $8.4 million in external services and $17.6 million in internal expenses; both of these increases are inclusive of $14.7 million in reimbursement of certain costs related to AG-221, AG-120 and AG-881, which are recorded as a reduction of research and development expenses. During the six months ended June 30, 2016 and 2015, we recognized certain cost reimbursements related to our on-going development activities under our IDH programs for which we are no longer acting as the principal in the transaction as a reduction of research and development expenses.

The increase in external services in 2016 was attributable to the following:

•

an increase of approximately $0.7 million for external clinical studies and manufacturing activities for our lead product candidate AG-120, offset by decreases of approximately $0.2 million, $2.0 million and $1.2 million for our lead product candidates AG-221, AG-881 and AG-348, respectively;

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an increase of approximately $3.6 million for preclinical and clinical studies for our product candidate AG-519; and

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an increase of approximately $7.5 million for costs related to other early research and platform programs.

We incurred approximately $17.6 million of additional internal research and development expenses related to the following:

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an increase of $13.8 million in personnel costs related to an increase in our internal headcount of 46%, which includes an increase of $4.9 million in stock-based compensation expense; and

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an increase of approximately $3.8 million for facilities and other related expenses.

General and Administrative Expense. The increase in general and administrative expenses was primarily attributable to the following:

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an increase of $4.9 million in personnel costs related to an increase in our internal headcount of 42% which includes an increase of $1.9 million for stock-based compensation expense; and

•

an increase of $2.7 million in professional service costs and insurance costs.

Interest Income. The increase is attributable to a more diversified investment portfolio, resulting in higher interest earned on investments.

Provision for Income Tax. We did not have a provision for income taxes during the six months ended June 30, 2016 or 2015 due to our net loss.

Liquidity and Capital Resources

Sources of liquidity

Since our inception, and through June 30, 2016, we have funded our operations through upfront, extension and cost reimbursement payments related to our collaboration agreements with Celgene, proceeds received from our issuance of preferred stock, our IPO and our follow-on public offerings, including private placement of common stock to an affiliate of Celgene, which was completed concurrently with our IPO.

In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn a significant amount of milestone payments, designation fees, license option fees, extension fees and are entitled to cost reimbursements under our collaboration agreements with Celgene. Our ability to earn the milestone payments and cost reimbursements and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and are uncertain at this time. Our right to payments under our collaboration agreements is our only committed potential external source of funds.

Cash flows

The following table provides information regarding our cash flows for the six months ended June 30, 2016 and 2015:


	Six Months Ended June 30,
(in thousands)	2016		2015
Net cash provided by (used in) operating activities	$	138,815	$	(21,605	)
Net cash provided by investing activities		20,912		77,194
Net cash provided by financing activities		2,557		2,913

Net increase in cash and cash equivalents	$	162,284	$	58,502

Net cash provided by (used in) operating activities. During the six months ended June 30, 2016, we received a $200.0 million upfront payment from Celgene related to our 2016 Agreement, $18.5 million in cost reimbursements related to our collaboration agreements, including a $25.0 million milestone payment in conjunction with the achievement of a substantive development milestone, and $3.4 million as reimbursement of tenant improvements. These amounts were offset by increased operating expenses which relate to increases in clinical study costs due to advancements in our lead product candidates, expanded facilities and increased staffing needs due to our expanding operations.

During the six months ended June 30, 2015, we received $13.3 million in cost reimbursements related to the 2010 Agreement, $20.0 million related to Celgene’s December 2014 election to extend the discovery phase of the 2010 Agreement and $10.0 million related to our AG-881 Agreements. We received $3.8 million of refundable income taxes during the six months ended June 30, 2015, related to a previously filed carryback claim.

Net cash provided by investing activities. The cash provided by investing activities for the six months ended June 30, 2016 and 2015 was primarily the result of higher proceeds from maturities and sales of marketable securities offset by $5.3 million and $14.7 million in purchases of property and equipment, respectively.

Net cash provided by financing activities. The cash provided by financing activities for the six months ended June 30, 2016 and 2015 was the result of proceeds received from stock option exercises and proceeds received from stock purchases made pursuant to our employee stock purchase plan.

Funding requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research, development and clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of Celgene or other collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2016, together with anticipated interest income, and anticipated expense reimbursements under our collaboration agreements with Celgene will enable us to fund our operating expenses and capital expenditure requirements through mid-2018. Our future capital requirements will depend on many factors, including:

•

the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

•

the success of our collaborations with Celgene;

•

the extent to which we acquire or in-license other medicines and technologies;

•

the costs, timing and outcome of regulatory review of our product candidates;

•

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

•

our ability to establish and maintain additional collaborations on favorable terms, if at all.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenue, if any, will be derived from sales of medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Off-balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

Contractual obligations

During the six months ended June 30, 2016, we entered into agreements in the normal course of business with CROs for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon 30 days’ prior written notice to the vendor. Under these agreements, as of June 30, 2016 we are obligated to pay up to $66.0 million to these vendors.

During the six months ended June 30, 2016, there were no other material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report on Form 10-K for the year ended December 31, 2015.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. As of June 30, 2016 and December 31, 2015, we had cash, cash equivalents and marketable securities of $512.3 million and $375.9 million, respectively, consisting primarily of investments in certificates of deposit, government securities and corporate debt securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term marketable securities. Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate 10% change in interest rates would have a material effect on the fair market value of our investment portfolio. We have the ability to hold our marketable securities until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

We are also exposed to market risk related to changes in foreign currency exchange rates. We have contracts with CROs that are located in Asia and Europe that are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign currency exchange rate risk. As of June 30, 2016 and December 31, 2015, we had minimal or no liabilities denominated in foreign currencies.

Item 4.

Controls and Procedures.

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of June 30, 2016, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

No change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, occurred during the fiscal quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A.

Risk Factors

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained herein, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The risks described are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. These risk factors restate and supersede the risk factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net losses were $117.7 million, $53.5 million and $39.4 million for the years ended December 31, 2015, 2014 and 2013, respectively, and $79.2 million for the six months ended June 30, 2016. As of June 30, 2016, we had an accumulated deficit of $363.8 million. We have never generated any revenue from product sales, have not completed the development of any product candidate and may never have a product candidate approved for commercialization. We have financed our operations primarily through private placements of our preferred stock, our initial public offering and the concurrent private placement, our follow-on public offerings and our collaboration agreements with Celgene Corporate, or Celgene, focused on cancer metabolism. We have devoted substantially all of our efforts to research and development. We are in clinical development stages of our product candidates and expect that it will be many years, if ever, before we have a product candidate ready for commercialization. Although we may from time to time report profitable results, we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

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initiate and continue clinical trials for our product candidates, including our most advanced product candidates AG-221, AG-120, AG-881, AG-348 and AG-519;

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continue our research and preclinical development of our product candidates;

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seek to identify additional product candidates;

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seek marketing approvals for our product candidates that successfully complete clinical trials;

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establish a sales, marketing and distribution infrastructure to commercialize any medicines for which we may obtain marketing approval;

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

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maintain, expand and protect our intellectual property portfolio;

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hire additional clinical, quality control and scientific personnel;

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add additional personnel to support our product development and planned future commercialization efforts and our operations;

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add equipment and physical infrastructure to support our research and development; and

•

acquire or in-license other medicines and technologies.

To become and remain profitable, we must develop and eventually commercialize a medicine or medicines with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those medicines for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenue that are significant or large enough to achieve profitability. We are currently in clinical testing stages for our most advanced product candidates. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause our stockholders to lose all or part of their investment.

We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate and continue clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of Celgene or other collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2016, together with anticipated interest income, and the anticipated expense reimbursements under our collaboration agreements with Celgene will fund our operating and capital expenditure requirements through mid-2018. Our estimate as to how long we expect our existing cash and cash equivalents, to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:

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the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

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the success of, and developments regarding, our collaborations with Celgene;

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the costs, timing and outcome of regulatory review of our product candidates;

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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•

our ability to establish and maintain additional collaborations on favorable terms, if at all; and

•

the extent to which we acquire or in-license other medicines and technologies.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds, other than our collaborations with Celgene, which are limited in scope and duration. For example, the discovery phase under our 2010 collaboration agreement with Celgene, or the 2010 Agreement, expired in April 2016 and we will no longer receive payments from Celgene with respect to extensions of the discovery phase under the 2010 Agreement. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage company. We were founded in the second half of 2007 and commenced operations in late 2008. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates, undertaking preclinical and clinical studies of our product candidates, and establishing a commercial infrastructure. All of our product candidates are still in preclinical and clinical development. We have not yet demonstrated our ability to successfully complete any large-scale or pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale medicine, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes about 10 to 15 years to develop one new medicine from the time it is discovered to when it is available for treating patients, assuming that it successfully completes all stages of research and development and achieves marketing approval, all of which is highly uncertain. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

We may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Risks Related to the Discovery, Development, and Commercialization of our Product Candidates

We do not know whether we will be able to develop any medicines of commercial value, based on our approach to the discovery and development of product candidates that target cellular metabolism.

Our scientific approach focuses on using our proprietary technology to identify key metabolic enzymes in cancer, RGDs or other diseased cells in the laboratory and then using these key enzymes to screen for and identify product candidates targeting cellular metabolism. In addition, in May 2016 we entered into a new collaboration agreement with Celgene, or the 2016 Agreement, focused on metabolic immuno-oncology. Metabolic immuno-oncology is an emerging field of cancer research focused on altering the metabolic state of immune cells to enhance the body’s immune response to cancer.

Any medicines that we develop may not effectively correct metabolic pathways or affect the metabolic state of immune cells. Even if we are able to develop a product candidate that targets cellular metabolism in preclinical studies, we may not succeed in demonstrating safety and efficacy of the product candidate in human clinical trials. Our focus on using our proprietary technology to screen for and identify product candidates targeting cellular metabolism may not result in the discovery and development of commercially viable medicines to treat cancer or RGDs.

We may not be successful in our efforts to identify or discover potential product candidates.

A key element of our strategy is to identify and test compounds that target cellular metabolism in a variety of different types of cancer and RGDs, as well as in immune cells for the treatment of cancer. A significant portion of the research that we are conducting involves new compounds and drug discovery methods, including our proprietary technology. The drug discovery that we are conducting using our proprietary technology may not be successful in identifying compounds that are useful in treating cancer or RGDs. In addition, our efforts in the emerging field of metabolic immuno-oncology may not be as successful as our efforts to date in cancer metabolism and RGDs. Furthermore, our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

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the research methodology used may not be successful in identifying appropriate biomarkers or potential product candidates; or

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potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be medicines that will receive marketing approval and achieve market acceptance.

Research programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful.

If we are unable to identify suitable compounds for preclinical and clinical development, we will not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.

We depend heavily on the success of our most advanced product candidates, all of which are still in clinical development. Clinical trials of our product candidates may not be successful. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the identification of our most advanced product candidates, AG-221, AG-120 and AG-881 for the treatment of hematological and solid tumors and AG-348 and AG-519 for the treatment of PK deficiency. We or our collaborator have initiated clinical trials for these product candidates. We have not commenced clinical trials for any of our other product candidates. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of these product candidates by our collaborators and us. The success of our product candidates will depend on many factors, including the following:

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successful enrollment in, and completion of, clinical trials;

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safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority for marketing approval

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timely receipt of marketing approvals from applicable regulatory authorities;

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establishing both clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers;

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the performance of our collaborators;

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obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our medicines;

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launching commercial sales of the medicines, if and when approved, whether alone or in collaboration with others;

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acceptance of the medicines, if and when approved, by patients, the medical community and third-party payors;

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effectively competing with other therapies;

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continuing acceptable safety profile for the medicines following approval;

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enforcing and defending intellectual property rights and claims; and

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achieving desirable medicinal properties for the intended indications.

Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any collaborator. If we or our collaborators do not achieve one or more of these factors in a timely manner or at all, we or our collaborators could experience significant delays or an inability to successfully commercialize our most advanced product candidates, which would materially harm our business.

If clinical trials of our product candidates fail to demonstrate safety and efficacy 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 our product candidates.

We, and any collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the European Medicines Agency, or the EMA, impose similar requirements. We have not previously submitted a new drug application, or NDA, to the FDA or similar drug approval filings to comparable foreign regulatory authorities for any of our product candidates. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our product candidates is susceptible to the risk of failure inherent at any stage of product development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any future collaborators, and impair our ability to generate revenue from product sales, regulatory and commercialization milestones and royalties. Moreover, if we or our collaborators are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we or our collaborators are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we or our collaborators may:

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be delayed in obtaining marketing approval for our product candidates;

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not obtain marketing approval at all;

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

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

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be subject to additional post-marketing testing requirements; or

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have the medicine removed from the market after obtaining marketing approval.

Our failure to successfully complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.

If we, or any collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our product candidates, potential clinical development, marketing approval or commercialization of our product candidates could be delayed or prevented.

We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

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regulators or institutional review boards may not authorize us, our collaborators or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

•

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

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clinical trials of our product candidates may produce negative or inconclusive results, and we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials, including testing in more subjects, or abandon product development programs;

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the number of patients required for clinical trials of our product candidates may be larger than we anticipate; enrollment in these clinical trials, which may be particularly challenging for some of the orphan diseases we target in our RGD programs, may be slower than we anticipate; or participants may drop out of these clinical trials at a higher rate than we anticipate;

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

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we or our collaborators might have to suspend or terminate clinical trials of our product 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, our collaborators 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 our product candidates may be greater than anticipated;

•

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

•

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

Product development costs for us, or any collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of our product candidates. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we, or any future collaborators, may have the exclusive right to commercialize our product candidates or allow our competitors, or the competitors of any collaborators, to bring products to market before we, or any collaborators, do and impair our ability, or the ability of any collaborators, to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our product candidates.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We or our collaborators may not be able to initiate or continue clinical trials for our product candidates if we or they are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or analogous regulatory authorities outside the United States. Enrollment may be particularly challenging for some of the orphan diseases we target in our RGD programs. In addition, some of our competitors may have ongoing clinical trials for product candidates that would treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

Patient enrollment is also affected by other factors including:

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severity of the disease under investigation;

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availability and efficacy of approved medications for the disease under investigation;

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eligibility criteria for the study in question;

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perceived risks and benefits of the product candidate under study;

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efforts to facilitate timely enrollment in clinical trials;

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patient referral practices of physicians;

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the ability to monitor patients adequately during and after treatment; and

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proximity and availability of clinical trial sites for prospective patients.

Utilizing our precision medicine approach, we focus our development activities on genetically or biomarker defined patients most likely to respond to our therapies. As a result, the potential patient populations for our clinical trials are narrowed, and we may

experience difficulties in identifying and enrolling a sufficient number of patients in our clinical trials. In particular, the successful completion of our clinical development programs for AG-348 and AG-519 for the treatment of PK deficiency is dependent upon our ability to enroll a sufficient number of patients with PK deficiency. PK deficiency is a rare disease with a small patient population. Further, there are only a limited number of specialist physicians that regularly treat patients with PK deficiency and major clinical centers that support PK deficiency are concentrated in a few geographic regions. The small population of patients, the nature of the disease and limited trial sites may make it difficult for us to enroll enough patients to complete our clinical trials for AG-348 and AG-519 for PK deficiency in a timely and cost-effective manner.

In addition, other companies are conducting clinical trials, or may in the future conduct clinical trials, which may have similar eligibility criteria as our current or future clinical trials. For example, Novartis International AG, or Novartis, is currently conducting a phase 1 clinical trial of its IDH1 mutant inhibitor, IDH305, in patients with advanced malignancies, and this trial and other trials may compete with our clinical trials of AG-120 and/or AG-881 for eligible patients with hematological and/or other malignancies harboring an IDH1 mutation. Competition for these patients may make it particularly difficult for us to enroll enough patients to complete our clinical trials for AG-120 or AG-881 in a timely and cost-effective manner.

Furthermore, we rely on contract research organizations, or CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. Our or our collaborators’ inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If serious adverse side effects or unexpected characteristics are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

All of our lead product candidates are still in clinical stage development and their risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval. Adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us, any future collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our product candidates and could result in a more restrictive label, or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. If adverse effects were to arise in patients being treated with any of our product candidates, it could require us to halt, delay or interrupt clinical trials of such product candidate or adversely affect our ability to obtain requisite approvals to advance the development and commercialization of such product candidate. If any of our product candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any future collaborators, may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in earlier stage testing for treating cancer, RGDs or other diseases have later been found to cause side effects that prevented further development of the compound.

Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or future collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively impacted.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial medicines or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable medicines. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our therapeutics.

Because we are focused on precision medicine, in which predictive biomarkers will be used to identify the right patients for our drug candidates, we believe that our success may depend, in part, on our ability to develop companion diagnostics, which are assays or tests to identify an appropriate patient population for these drug candidates. There has been limited success to date industry-wide in developing these types of companion diagnostics. To be successful, we need to address a number of scientific, technical and logistical challenges. We have little experience in the development of diagnostics and may not be successful in developing appropriate diagnostics to pair with any of our therapeutic product candidates that receive marketing approval. Companion diagnostics are subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior to commercialization. Given our limited experience in developing diagnostics, we rely and expect to continue to rely in part or in whole on third parties for their design and manufacture. We also depend on Celgene for the development of diagnostics for some of our cancer therapeutic product candidates. If any parties, including without limitation Celgene or us, or any third parties engaged by Celgene or us are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience delays in doing so:

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the development of our therapeutic product candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our clinical trials;

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our therapeutic product candidates may not receive marketing approval if safe and effective use of a therapeutic product candidate depends on an in vitro diagnostic; and

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we may not realize the full commercial potential of any therapeutics that receive marketing approval if, among other reasons, we are unable to appropriately select patients who are likely to benefit from therapy with our medicines.

As a result, our business would be harmed, possibly materially.

We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our product candidates.

We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not accept or approve our NDAs for any of our product candidates, it may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required trials or studies, approval of any NDA or application that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our product candidates, generating revenue and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.

Even if any of our product candidates receives marketing approval, we or others may later discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, which could compromise our ability, or that of any future collaborators, to market the product.

Clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any future collaborator, may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:

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regulatory authorities may withdraw their approval of the product or seize the product;

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we, or any future collaborators, may be required to recall the product, change the way the product is administered or conduct additional clinical trials;

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additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product;

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we may be subject to fines, injunctions or the imposition of civil or criminal penalties;

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regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

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we, or any future collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients;

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we, or any future collaborators, could be sued and held liable for harm caused to patients;

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the product may become less competitive; and

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our reputation may suffer.

Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

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efficacy and potential advantages compared to alternative treatments;

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the approval, availability, market acceptance and reimbursement for the companion diagnostic;

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the ability to offer our medicines for sale at competitive prices;

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convenience and ease of administration compared to alternative treatments;

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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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ensuring uninterrupted product supply;

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the strength of marketing and distribution support;

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sufficient third-party coverage or reimbursement; and

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the prevalence and severity of any side effects.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

We have little experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved medicine for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to other third parties. We are in the early stages of building a sales and marketing infrastructure to sell, or participate in sales activities with our collaborators for, some of our product candidates if and when they are approved.

There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our medicines on our own include:

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our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future medicines;

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the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of product revenue to us are likely to be lower than if we were to market and sell any medicines that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our medicines effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and we and our collaborators will face competition with respect to any product candidates that we or they may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates, such as acute myelogenous leukemia, or AML, and high risk myelodysplasia. For example, Jazz Pharmaceuticals plc, Novartis and Abbvie Inc. (in collaboration with Roche Holdings Inc.) are each developing therapies to treat AML. Some competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches, for example, in the area of RGDs. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

We are developing most of our initial product candidates for the treatment of cancer. There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy, and cancer drugs are frequently prescribed off-label by healthcare professionals. Some of the currently approved drug therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult for us to achieve our business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates.

We are also pursuing product candidates to treat patients with RGDs. There are a variety of treatment options available, including a number of marketed enzyme replacement therapies, for treating patients with RGDs. In addition to currently marketed therapies, there are also a number of products that are either enzyme replacement therapies or gene therapies in various stages of clinical development to treat RGDs. These products in development may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain marketing approval.

There are also a number of product candidates in preclinical or clinical development by third parties to treat cancer and RGDs by targeting cellular metabolism. These companies include large pharmaceutical companies, including AstraZeneca plc, Eli Lilly and Company, Roche and its subsidiary Genentech, Inc., GlaxoSmithKline plc, Merck & Co., Novartis with its IDH1 mutant inhibitor IDH305, Pfizer, Inc., and Genzyme, a Sanofi company. There are also biotechnology companies of various sizes that are developing therapies to target cellular metabolism, including Alexion Pharmaceuticals, Inc., BioMarin Pharmaceutical Inc., Calithera Biosciences, Inc., Cornerstone Pharmaceuticals, Inc., Forma Therapeutics Holdings LLC with its IDH1 mutant inhibitor FT-2102, Shire Biochem Inc., Raze Therapeutics, Inc. and Selvita S.A. In addition, there are several companies developing immunotherapies, including metabolic immunotherapies, targeting cancer, including AstraZeneca PLC, Merck, Bristol-Myers Squibb Company, bluebird bio, Inc.,

Juno Therapeutics, Inc., Incyte Corporation, Calithera Biosciences, Inc., Pfizer, Novartis, Kite Pharma, Inc. and Jounce Therapeutics, Inc. Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that would render our product candidates obsolete or non-competitive. In addition, our competitors may discover biomarkers that more efficiently measure metabolic pathways than our methods, which may give them a competitive advantage in developing potential products. Our competitors may also obtain marketing approval from the FDA or other regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other clinical stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Even if we or our collaborators are able to commercialize any product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The commercial success of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by third-party payors, including government health administration authorities and private health coverage insurers. If coverage and reimbursement is not available, or reimbursement is available only to limited levels, we, or any future collaborators, may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any future collaborators, to establish or maintain pricing sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any future collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more product candidates, even if our product candidates obtain marketing approval.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any future collaborators, to commercialize any of our product candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any future collaborators to sell our product candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated product revenue. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we, or any future collaborator, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product candidates for which we, or any future collaborator, obtain marketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Product liability lawsuits against us or our collaborators could cause us or our collaborators to incur substantial liabilities and could limit commercialization of any medicines that we or they may develop.

We and our collaborators face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we or they commercially sell any medicines that we or they may develop. If we or our collaborators cannot successfully defend ourselves or themselves against claims that our product candidates or medicines caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

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decreased demand for any product candidates or medicines that we may develop;

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injury to our reputation and significant negative media attention;

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withdrawal of clinical trial participants;

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significant costs to defend the related litigation;

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substantial monetary awards to trial participants or patients;

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loss of revenue;

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reduced resources of our management to pursue our business strategy; and

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the inability to commercialize any medicines that we may develop.

Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage when we continue clinical trials and if we successfully commercialize any medicine. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. In addition, if one of our collaboration partners were to become subject to product liability claims or were unable to successfully defend themselves against such claims, any such collaboration partner could be more likely to terminate such relationship with us and therefore substantially limit the commercial potential of our products.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.

Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our product research, development and commercialization efforts could be delayed.

Risks Related to Our Dependence on Third Parties

We depend on our collaborations with Celgene and may depend on collaborations with additional third parties for the development and commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

In April 2010, we entered into the 2010 Agreement and in May 2016, we entered into the 2016 Agreement. These collaborations involve complex allocations of rights, provide for milestone payments to us based on the achievement of specified clinical development, regulatory and commercial milestones, provide us with royalty-based revenue if certain product candidates are successfully commercialized and provide for cost reimbursements of certain development activities. The discovery phase under the 2010 Agreement concluded in April 2016 and we will no longer receive additional payments to extend the term of the discovery phase for that agreement. In April 2015, we entered into the AG-881 Agreements. We cannot predict the success of these collaborations.

We may seek other third-party collaborators for the development and commercialization of our product candidates. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates, including our collaborations with Celgene, pose the following risks to us:

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Collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example, under the 2010 Agreement, the AG-881 Agreements and programs under a co-development and co-commercialization agreement pursuant to the 2016 Agreement, development and commercialization plans and strategies for licensed programs, such as AG-221, will be conducted in accordance with a plan and budget approved by a joint committee comprised of equal numbers of representatives from each of us and Celgene, as to which Celgene may have final decision-making authority.

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Collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities. For example, under the 2010 Agreement and the 2016 Agreement, it is possible for Celgene to elect not to progress into preclinical development a product candidate that we have nominated and the joint research committee confirmed, without triggering a termination of the collaboration arrangement.

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Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing, which may result in a need for additional capital to pursue further development or commercialization of the applicable product candidate. For example, under the 2010 Agreement and the 2016 Agreement, it is possible for Celgene to terminate the agreement, upon 90 days prior written notice, with respect to any product candidate at any point in the research, development and clinical trial process, without triggering a termination of the remainder of the collaboration arrangement.

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Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our medicines or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours.

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Collaborators with marketing and distribution rights to one or more medicines may not commit sufficient resources to the marketing and distribution of such medicine or medicines.

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Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation. For example, under specified circumstances Celgene has the first right to maintain or defend our intellectual property rights with respect to AG-221 under the 2010 Agreement and, although we may have the right to assume the maintenance and defense of our intellectual property rights if Celgene does not, our ability to do so may be compromised by Celgene’s actions.

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Disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our medicines or product candidates or that result in costly litigation or arbitration that diverts management attention and resources.

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We may lose certain valuable rights under circumstances identified in our collaborations, including, in the case of our agreements with Celgene, if we undergo a change of control.

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Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates. For example, Celgene can terminate its agreements with us, in their entirety or with respect to AG-221 or any program under the 2016 Agreement, upon 90 days’ notice and can terminate each entire agreement with us in connection with a material breach of the agreement by us that remains uncured for a period ranging from 60 to 90 days.

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Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.

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If a present or future collaborators of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated.

We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate.

We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. For example, during the discovery phase of the 2016 Agreement, we may not directly or indirectly develop, manufacture or commercialize, except pursuant to the agreement, any medicine or product candidate with specified activity against certain metabolic targets except in connection with certain third-party collaborations or with respect to certain targets the rights to which have reverted back to us pursuant to the terms of the 2016 Agreement. Following the discovery phase until termination or expiration of the 2010 Agreement, either in its entirety or with respect to the relevant program, we may not directly or indirectly develop, manufacture or commercialize, outside of the collaboration, any medicine or product candidate with specified activity against any collaboration target that is within a licensed program or against any former collaboration target against which Celgene is conducting an independent program under the agreement. Following the discovery phase of the 2016 Agreement until termination or expiration of the applicable co-development and co-commercialization agreement or license agreement under the 2016 Agreement, we may not directly or indirectly develop, manufacture or commercialize, outside of the collaboration, any medicine or product candidate with specified activity against the collaboration target that is the subject of such co-development and co-commercialization agreement or license agreement, except in connection with certain third-party collaborations or with respect to certain targets the rights to which have reverted back to us pursuant to the terms of the 2016 Agreement.

Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

We rely and expect to continue to rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.

We do not independently conduct clinical trials of any of our product candidates. We rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. In addition we currently rely and expect to continue to rely on third parties to conduct some aspects of our research and preclinical testing. Any of these third parties may terminate their engagements with us, some in the event of an uncured material breach and some at any time. If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third-parties or to do so on commercially reasonable terms. Switching or adding additional third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays may occur in our product development activities. Although we seek to carefully manage our relationships with our CROs, we could encounter similar challenges or delays in the future and these challenges or delays could have a material adverse impact on our business, financial condition and prospects.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with current good clinical practices, or cGCP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the European Medicines Agency, or EMA, or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with cGCP regulations. In addition, our clinical trials must be conducted with product produced under current good manufacturing practices, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. In addition, these third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines. As a result, our results of operations and the commercial prospects for our medicines would be harmed, our costs could increase and our ability to generate revenue could be delayed.

We also rely and expect to continue to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our medicines, producing additional losses and depriving us of potential product revenue.

We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for late-stage clinical trials and for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or medicines or that such supply will not be available to us at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our product candidates for preclinical and clinical testing and for commercial supply of any of these product candidates for which we or our collaborators obtain marketing approval. To date, we have obtained materials for AG-221, AG-120, AG-881, AG-348 and AG-519 for our ongoing preclinical and clinical testing from third-party manufacturers. We do not have any long-term supply agreements with the third-party manufacturers, and we purchase our required drug supply on a purchase order basis.

We may be unable to establish any long-term supply agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

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reliance on the third party for regulatory compliance and quality assurance;

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the possible breach of the manufacturing agreement by the third party;

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the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and

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reliance on the third party for regulatory compliance, quality assurance, environmental and safety and pharmacovigilance reporting.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements on a global basis. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or medicines, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our business and results of operations.

Any medicines that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply for bulk drug substances. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain patent or trade secret protection for our medicines and technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize medicines and technology similar or identical to ours, and our ability to successfully commercialize our medicines and technology may be adversely affected.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary medicines and technology. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and medicines that are important to our business. We do not yet have issued patents for all our lead product candidates in all markets we intend to commercialize.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

We may in the future license patent rights that are valuable to our business from third parties, in which event we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or medicines underlying such licenses. We cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. If any such licensors fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated and our right to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected. In addition to the foregoing, the risks associated with patent rights that we license from third parties also apply to patent rights we own.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or medicines or that effectively prevent others from commercializing competitive technologies and medicines. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

Assuming the other requirements for patentability are met, prior to March 2013, in the United States, the first to make the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. Beginning in March 2013, the United States transitioned to a first inventor to file system in which, assuming the other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent. We may be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize medicines without infringing third-party patent rights.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and medicines. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents and other intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we or our collaborators are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. We have in the past and may in the future become party to, or threatened with, adversarial proceedings or

litigation regarding intellectual property rights with respect to our medicines and technology, including interference proceedings before the U.S. Patent and Trademark Office. For example, in 2011, The Leonard and Madlyn Abramson Family Cancer Research Institute at the Abramson Cancer Center of the University of Pennsylvania initiated a lawsuit against us, one of our founders, Craig B. Thompson, M.D., and Celgene, alleging misappropriation of intellectual property and, in 2012, the Trustees of the University of Pennsylvania initiated a similar lawsuit against us and Dr. Thompson. Each of these lawsuits was settled in 2012. No other legal proceedings have been filed against us to date. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we or one of our collaborators are found to infringe a third party’s intellectual property rights, we or they could be required to obtain a license from such third party to continue developing and marketing our medicines and technology. However, we or our collaborators may not be able to obtain any required license on commercially reasonable terms or at all. Even if we or our collaborators were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us. We or our collaborators could be forced, including by court order, to cease developing and commercializing the infringing technology or medicine. In addition, we or our collaborators could be found liable for monetary damages. A finding of infringement could prevent us or our collaborators from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we or our collaborators have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees, consultants or advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. Other than the litigation initiated by the Leonard and Madlyn Abramson Family Cancer Research Institute at the Abramson Cancer Center of the University of Pennsylvania and by the Trustees of the University of Pennsylvania described above, no such claims have been filed against us to date.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology and medicines, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. With respect to our proprietary cellular metabolism technology platform, we consider trade secrets and know-how to be our primary intellectual property. Trade secrets and know-how can be difficult to protect. In particular, we anticipate that with respect to this technology platform, these trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel skilled in the art from academic to industry scientific positions.

We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or

unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be harmed.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates. If we or our collaborators are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or they will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by the EMA and comparable regulatory authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We and our collaborators have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process.

Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we or our collaborators ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved medicine not commercially viable.

Accordingly, if we or our collaborators experience delays in obtaining approval or if we or they fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired.

A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

In the United States, AG-221 and AG-120 received fast track designation for treatment of patients with acute myelogenous leukemia, or AML, that harbor an IDH2 and IDH1 mutation, respectively. If a drug is intended for the treatment of a serious or life-threatening disease or condition and the drug demonstrates the potential to address unmet medical needs for this disease or condition, the drug sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant fast track designation, so even if we believe a particular product candidate is eligible for such designation, the FDA may decide not to grant it. Even though AG-221 and AG-120 have received fast track designation for treatment of patients with AML that harbor an IDH2 and IDH1 mutation, respectively, we may not experience a faster development process, review or approval, if at all, compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

Failure to obtain marketing approval in foreign jurisdictions would prevent our medicines from being marketed in such jurisdictions.

In order to market and sell our medicines in the European Union and many other jurisdictions, we or our collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain

FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, a product be approved for reimbursement before the product can be approved for sale in that country. We or our collaborators may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our medicines in any market.

Any product candidate for which we or our collaborators obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our medicines, when and if any of them are approved.

Any product candidate for which we or our collaborators obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such medicine, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the medicine may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy.

The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our medicines 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.

In addition, later discovery of previously unknown adverse events or other problems with our medicines, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

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restrictions on such medicine, manufacturers or manufacturing processes;

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restrictions on the labeling or marketing of a medicine;

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restrictions on distribution or use of a medicine;

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requirements to conduct post-marketing studies or clinical trials;

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warning letters or untitled letters;

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withdrawal of the medicine from the market;

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refusal to approve pending applications or supplements to approved applications that we submit;

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recall of medicines;

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damage to relationships with any potential collaborators;

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unfavorable press coverage and damage to our reputation;

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fines, restitution or disgorgement of profits or revenue;

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suspension or withdrawal of marketing approvals;

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refusal to permit the import or export of our medicines;

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product seizure;

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injunctions or the imposition of civil or criminal penalties; and

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litigation involving patients using our medicines.

Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Our relationships with healthcare providers, physicians and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with healthcare providers, physicians and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

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the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, 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;

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the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $5,500 to $11,000 per false claim;

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

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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;

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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, with data collection beginning in August 2013; and

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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of our other product candidates and affect the prices we, or they, may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our other product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

For example, in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the PPACA. Among the provisions of the PPACA of potential importance to our business and our product candidates are the following:

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an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;

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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

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expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;

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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

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extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;

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expansion of eligibility criteria for Medicaid programs;

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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

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new requirements to report certain financial arrangements with physicians and teaching hospitals;

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a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

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a new Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs; and

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a Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models.

Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislation, will continue until 2025. In addition, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and may otherwise affect the prices we may obtain for any of our product candidates for which regulatory approval is obtained.

We expect that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our medicines. Moreover, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent product labeling and post-marketing testing and other requirements.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our management and scientific teams, each of whom is employed “at will,” meaning we or they may terminate the employment relationship at any time. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies 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, including our scientific co-founders, 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.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately, disclose unauthorized activities to us, or comply with securities laws. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, including for illegal insider trading activities, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We expect to expand our development, regulatory and future sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the expected physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.

In the future, we may enter into transactions to acquire other businesses, products or technologies. Because we have not made any acquisitions to date, our ability to do so successfully is unproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

Risks Related to Our Common Stock

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

•

establish a classified board of directors such that not all members of the board are elected at one time;

•

allow the authorized number of our directors to be changed only by resolution of our board of directors;

•

limit the manner in which stockholders can remove directors from the board;

•

establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

•

require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

•

limit who may call stockholder meetings;

•

authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a shareholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

•

require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

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 relies in part on the research and reports that industry or financial analysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.

An active trading market for our common stock may not be sustained.

Although our common stock is listed on the NASDAQ Global Select Market, an active trading market for our shares may not be sustained. If an active market for our common stock does not continue, it may be difficult for our stockholders to sell their shares without depressing the market price for the shares or sell their shares at all. An inactive trading market for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

The price of our common stock is likely to be volatile, which could result in substantial losses for purchasers of our common stock.

The trading price of our common stock has been, and may continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. For example, since January 1, 2014 the price of our common stock on the NASDAQ Global Select Market has ranged from $21.70 per share to $138.85 per share. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including:

•

regulatory actions with respect to our product candidates or our competitors’ products and product candidates;

•

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

•

the timing and results of clinical trials of product candidates;

•

commencement or termination of collaborations for our development programs;

•

failure or discontinuation of any of our development programs;

•

results of clinical trials of product candidates of our competitors;

•

regulatory or legal developments in the United States and other countries;

•

developments or disputes concerning patent applications, issued patents or other proprietary rights;

•

the recruitment or departure of key personnel;

•

the level of expenses related to any of our product candidates or clinical development programs;

•

the results of our efforts to develop additional product candidates or products;

•

actual or anticipated changes in estimates as to financial results or development timelines;

•

announcement or expectation of additional financing efforts;

•

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

•

variations in our financial results or those of companies that are perceived to be similar to us;

•

changes in estimates or recommendations by securities analysts, if any, that cover our stock;

•

changes in the structure of healthcare payment systems;

•

market conditions in the pharmaceutical and biotechnology sectors;

•

general economic, industry and market conditions; and

•

the other factors described in this “Risk Factors” section.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Certain stockholders hold a substantial number of shares of our common stock. If such stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline.

In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our stock incentive plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act, and, in any event, we have filed a registration statement permitting shares of common stock issued on exercise of options to be freely sold in the public market. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Certain holders of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates. Any sales of securities by these stockholders who have exercised registration rights could have a material adverse effect on the trading price of our common stock.

Our executive officers, directors and principal stockholders maintain the ability to significantly influence all matters submitted to stockholders for approval.

As of June 30, 2016, our executive officers, directors and a small group of stockholders, in the aggregate, beneficially owned shares representing a significant percentage of our capital stock. As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, could significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our common stock.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a company 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 and other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income or taxes may be limited. Our prior equity offerings and other changes in our stock ownership, some of which are outside of our control, may have resulted or could in the future result in an ownership change. For example, in 2012, we completed a review of our changes in ownership through December 31, 2011, and determined that we had two qualified ownership changes since inception. The changes of ownership will result in net operating loss and research and development credit carryforwards that we expect to expire unutilized. If additional limitations were to apply, utilization of a portion of our net operating loss and tax credit carryforwards could be further limited in future periods and a portion of the carryforwards could expire before being available to reduce future income tax liabilities.

We incur increased costs as a result of operating as a public company, and our management is now required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly since January 1, 2015 when we ceased to be an “emerging growth company,” we have incurred and will continue to incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The NASDAQ Global Select Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish with our periodic Exchange Act reports a report by our management on our internal control over financial reporting and are required to include with our annual report an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404, we have engaged in a process to document and evaluate our internal control over financial reporting, which has been, and will continue to be, both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, from time to time, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for our stockholders.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

Item 6.

Exhibits.

The exhibits listed in the Exhibit Index to this Quarterly Report on Form 10-Q are incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AGIOS PHARMACEUTICALS, INC.

Date: August 8, 2016	By:	/s/ David P. Schenkein
		David P. Schenkein President and Chief Executive Officer (principal executive officer)

Date: August 8, 2016	By:	/s/ Glenn Goddard
		Glenn Goddard Senior Vice President, Finance (principal financial and accounting officer)

EXHIBIT INDEX

Incorporated by Reference

Exhibit

Number

Description of Exhibit

Form

File Number

Date of Filing

Exhibit
Number

Filed
Herewith

3.1

Restated Certificate of Incorporation

8-K

001-36014

July 29, 2013

3.1

3.2

Amended and Restated By-Laws

8-K

001-36014

July 29, 2013

3.2

10.1†

Master Research and Collaboration Agreement, dated May 17, 2016, by and among the Registrant, Celgene Corporation and Celgene RIVOT Ltd.

10.2

Severance Benefits Plan

8-K

001-36014

April 22, 2016

10.1

31.1

Certification of principal executive officer pursuant to Rule 13a 14(a)/15d 14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1

Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Label Linkbase Document

101.PRE

XBRL Taxonomy Presentation Linkbase Document

†	Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission.

EX-10.1 2 d85594dex101.htm EX-10.1 EX-10.1

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Double asterisks denote omissions.

EXECUTION VERSION

Exhibit 10.1

MASTER RESEARCH AND COLLABORATION AGREEMENT

by and among

AGIOS PHARMACEUTICALS, INC.

and

CELGENE CORPORATION

and

CELGENE RIVOT LTD.

Dated as of May 17, 2016

TABLE OF CONTENTS


		Page

ARTICLE I DEFINITIONS		1

1.1	Terms	1

1.2	Additional Definitions	15

ARTICLE II COLLABORATION; PRE-OPTION EXERCISE DEVELOPMENT		17

2.1	Scope and Collaboration Overview	17

2.2	Designation of Research Programs	20

2.3	Nomination of Development Candidates; Designation of Designated Development Programs	21

2.4	Disposition of Programs After the End of the Research Term	22

2.5	Completion of Pre-Exercise Phase I Development	23

2.6	Regulatory Affairs	23

2.7	Reports; Results; Testing by the Parties	24

2.8	No Representation	24

2.9	Subcontracting	24

2.10	Academic Collaborators	24

2.11	Material Transfer	25

2.12	Reversion of Rights	26

ARTICLE III OPTION EXERCISE; DEVELOPMENT & COMMERCIALIZATION AGREEMENTS		26

3.1	Option Grant and Exercise	26

3.2	Government Approvals	28

ARTICLE IV GOVERNANCE		31

4.1	General	31

4.2	Joint Steering Committee	32

4.3	Joint Research Committee	33

4.4	Joint Development Committee	34

4.5	Joint Commercialization Committee	36

4.6	Joint Patent Committee	37

4.7	Alliance Managers	37

4.8	General Committee Membership and Procedures	37

4.9	Responsibilities under Specific Agreements	38

4.10	Decision-Making	39

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4.11	Scope of Governance	40

4.12	Agios Right to Discontinue Participation	40

ARTICLE V LICENSES; EXCLUSIVITY		41

5.1	Licenses	41

5.2	Exclusivity	42

ARTICLE VI FINANCIAL TERMS		45

6.1	Upfront Payment	45

6.2	Designation Fees	45

6.3	Research Term Extension Fee	45

6.4	Development Costs and Manufacturing Costs	45

6.5	Financial Records	45

6.6	Tax Matters	45

6.7	Payments; Currency Exchange	46

6.8	Late Payments	46

ARTICLE VII INTELLECTUAL PROPERTY		47

7.1	Ownership of Inventions	47

7.2	Prosecution of Patents	47

7.3	Defense of Claims Brought by Third Parties	47

7.4	Enforcement and Defense of Patents	47

7.5	Third Party Licenses	48

ARTICLE VIII CONFIDENTIALITY		48

8.1	Confidential Information	48

8.2	Permitted Disclosure	49

8.3	Publicity; Terms of this Agreement; Non-Use of Names	49

8.4	Publications	52

8.5	Term	53

8.6	Return of Confidential Information	53

ARTICLE IX REPRESENTATIONS AND WARRANTIES		54

9.1	Mutual Representations	54

9.2	Additional Agios Representations	54

9.3	Covenants	56

9.4	Disclaimer	57

ARTICLE X INDEMNIFICATION; INSURANCE		58

10.1	By Celgene	58

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10.2	By Agios	58

10.3	Indemnification Following Exercise of an Option	59

10.4	Joint Defendants	59

10.5	Limitation of Liability	60

10.6	Insurance	60

ARTICLE XI TERM AND TERMINATION		60

11.1	Term; Expiration	60

11.2	Termination for Convenience	60

11.3	Termination for Breach	61

11.4	Termination for Insolvency	62

11.5	Effects of Termination	62

11.6	Surviving Provisions	63

ARTICLE XII MISCELLANEOUS		64

12.1	Dispute Resolution	64

12.2	Submission to Court for Resolution	64

12.3	Governing Law	64

12.4	Assignment	64

12.5	Force Majeure	66

12.6	Notices	66

12.7	Waiver	67

12.8	Severability	67

12.9	Entire Agreement	67

12.10	Modification	67

12.11	Independent Contractors; No Intended Third Party Beneficiaries	68

12.12	Interpretation; Construction	68

12.13	Performance by Affiliates	68

12.14	Counterparts	68

12.15	Equitable Relief	69

12.16	Further Assurances	69

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LIST OF APPENDICES


Appendix A		Form of Co-Development and Co-Commercialization Agreement

Appendix B		Form of License Agreement

Appendix C		Certain Financial Definitions

LIST OF SCHEDULES


Schedule 1.1.29		Data Package Information

Schedule 1.1.35		Development Candidate Criteria

Schedule 1.1.82		Publication Guidelines

Schedule 1.1.83		Qualified Early Exercise I&I Program Criteria

Schedule 9.2.9		Agios Patents

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MASTER RESEARCH AND COLLABORATION AGREEMENT

This Master Research and Collaboration Agreement (this “Agreement”) is entered into as of May 17, 2016 (the “Effective Date”) by and among Agios Pharmaceuticals, Inc., a Delaware corporation (“Agios”), on the one hand, and Celgene Corporation, a Delaware corporation (“Celgene Corp.”), with respect to all rights and obligations under this Agreement in the United States, and Celgene RIVOT Ltd., a Bermuda entity (“Celgene RIVOT”), with respect to all rights and obligations under this Agreement outside of the United States (Celgene RIVOT and Celgene Corp. together, “Celgene”), on the other hand. Celgene and Agios are each referred to herein by name or as a “Party”, or, collectively, as the “Parties.”

RECITALS

WHEREAS, Agios is a clinical-stage company engaged in the research and development of novel therapies relating to cellular metabolism, including for the treatment of cancer through targeting cancer metabolism or the immune system;

WHEREAS, Celgene is engaged in the research, development and commercialization of therapeutic products to treat various diseases and conditions, including for the treatment of cancer and diseases and conditions of the immune system;

WHEREAS, the Parties intend to collaborate on the research and development of immunotherapies against certain metabolic targets that exert their antitumor efficacy primarily via the immune system;

WHEREAS, Agios may conduct certain research and development activities to identify therapeutics directed to certain metabolic targets, and Celgene will obtain exclusive options to enter into a co-development and co-commercialization agreement or a license agreement with Agios with respect to such therapeutics, as further described herein;

WHEREAS, upon each exercise of each such option, the Parties shall enter into a separate co-development and co-commercialization agreement or license agreement, on the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Terms.

1.1.1 “2010 Agreement” means the Discovery and Development Collaboration and License Agreement between Agios and Celgene dated April 14, 2010, as amended.

1.1.2 “Active” or “Activity” means, with respect to a given chemical entity in relation to a given Program Target, that such chemical entity has a level of potency against the applicable Program Target, in the same direction of modulation, expressed as [**], as applicable, for a Development Candidate for such Program, as measured in a cellular, or, if not available, biochemical, assay for such Program Target, as designated by the JRC. The JRC may establish more specific baseline criteria for activity in modulating a particular Program Target based on the foregoing criteria. For example, if the [**].

1.1.3 “Affiliate” means, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as the case may be, for so long as such control exists. As used in this Section 1.1.3, “control” means: (a) to possess, directly or indirectly, the power to direct the management and policies of a Person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance; or (b) direct or indirect beneficial ownership of at least fifty percent (50%) (or such lesser percentage that is the maximum allowed to be owned by a foreign Person in a particular jurisdiction) of the voting share capital in a Person. For purposes of this Agreement and any Development & Commercialization Agreement, neither Celgene nor Agios shall be deemed an Affiliate of the other Party.

1.1.4 “Agios Intellectual Property” means Agios Know-How and Agios Patents, collectively.

1.1.5 “Agios Know-How” means any Know-How that is (a) Controlled by Agios as of the Effective Date or during the Term, and (b) necessary or useful for the Development, Manufacture and/or Commercialization of any Program Compound(s) or Program Product(s).

1.1.6 “Agios Lead Shared Program” means a Shared 50/50 Program, other than a Celgene Lead Shared Program, for which Agios will be the “Lead U.S. Party” (as defined in Appendix A), subject to the terms and conditions of the applicable Co-Development and Co-Commercialization Agreement.

1.1.7 “Agios Patents” means any and all Patents that (a) are Controlled by Agios as of the Effective Date or during the Term, and (b) Cover the Development, Manufacture and/or Commercialization of any Program Compound(s) or Program Product(s) (including the composition of matter, manufacture or any use thereof).

1.1.8 “Antitrust Law” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the “HSR Act”), the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other Laws related to merger control or designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade, in the following jurisdictions: the United States, all states and territories thereof, Australia, Brazil, Canada, the countries that are officially recognized as member states of the European Union from time to time (the “EU”), Republic of Korea, Japan, Mexico, Taiwan, and any other jurisdiction that Celgene, in its good faith judgment, determines requires a pre-merger notification filing prior to consummation of the transactions contemplated by the Development & Commercialization Agreements in accordance with Section 3.2 of this Agreement.

- 2 -

1.1.9 “beneficial owner,” “beneficially owns,” “beneficial ownership” and terms of similar import used in this Agreement shall, with respect to a Person, have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (i) assuming the full conversion into, and exercise and exchange for, shares of common stock, other voting stock or any securities exercisable for common stock or other voting stock beneficially owned by such Person and (ii) determined without regard for the number of days in which such Person has the right to acquire such beneficial ownership.

1.1.10 “Business Day” means a day other than a Saturday or Sunday or federal holiday in Cambridge, Massachusetts or Summit, New Jersey.

1.1.11 “Calendar Quarter” means a calendar quarter ending on the last day of March, June, September or December; provided, however, that (a) the first Calendar Quarter shall begin on the Effective Date and end on the last day of June, 2016, and (b) the final Calendar Quarter shall end on the last day of the Term.

1.1.12 “Calendar Year” means a period of time commencing on January 1 and ending on the following December 31; provided, however, that (a) the first Calendar Year shall begin on the Effective Date and end on December 31, 2016, and (b) the final Calendar Year shall end on the last day of the Term.

1.1.13 “Celgene Collaboration Intellectual Property” means any Patents or Know-How, or Celgene’s and/or its Affiliates’ interest therein, that is developed or generated by or on behalf of Celgene and/or its Affiliate(s) through the use of Agios Know-How, Joint Collaboration Know-How or materials disclosed or transferred by Agios to Celgene in the conduct of the Collaboration during the Option Term and is necessary or useful for the Development, Manufacture and/or Commercialization of any Program Compound(s) or Program Product(s).

1.1.14 “Celgene Intellectual Property” means Celgene Know-How and Celgene Patents, collectively.

1.1.15 “Celgene Know-How” means any Know-How that is (a) Controlled by Celgene as of the Effective Date or during the Term; (b) necessary or useful for the Development, Manufacture and/or Commercialization of any Program Compound(s) or Program Product(s); and (c) contributed by Celgene, in Celgene’s sole discretion, to the Collaboration, as evidenced by written notice from Celgene to Agios; but excluding Celgene Collaboration Intellectual Property.

1.1.16 “Celgene Lead Shared Program” means the Shared 65/35 Program or any Shared 50/50 Program for which Celgene will be the “Lead U.S. Party” (as defined in Appendix A), subject to the terms and conditions of the applicable Co-Development and Co-Commercialization Agreement.

1.1.17 “Celgene Patents” means any Patents that (a) are Controlled by Celgene as of the Effective Date or during the Term; (b) Cover the Development, Manufacture and/or Commercialization of any Program Compound(s) or Program Product(s) (including the

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composition of matter, manufacture or any use thereof); and (c) are contributed by Celgene, in Celgene’s sole discretion, to the Collaboration, as evidenced by written notice from Celgene to Agios; but excluding Celgene Collaboration Intellectual Property.

1.1.18 “Change of Control” of a Party means any of the following, in a single transaction or a series of related transactions: (a) the sale or disposition of all or substantially all of the assets of such Party to a Third Party, (b) the direct or indirect acquisition by a Third Party (other than an employee benefit plan (or related trust) sponsored or maintained by such Party or any of its Affiliates) of beneficial ownership of more than [**] percent ([**]%) of the then-outstanding common shares or voting power of such Party or any direct or indirect entity which holds, directly or indirectly, beneficial ownership of more than [**] percent ([**]%) of the then-outstanding common shares or voting power of such Party (a “Parent Entity”), or (c) the merger or consolidation of such Party or any Parent Entity with or into a Third Party, unless, following such merger or consolidation, the stockholders of such Party or Parent Entity immediately prior to such merger or consolidation beneficially own directly or indirectly more than [**] percent ([**]%) of the then-outstanding common shares or voting power of the entity resulting from such merger or consolidation.

1.1.19 “Chemistry, Manufacturing and Controls” or “CMC” means the part of pharmaceutical development that is directed to the Development and Manufacture of products, the specifications therefor, and other parameters which indicate that the finished drug or biologic product and the manufacturing process are consistent and controlled, in each case, as specified by the FDA or other applicable Regulatory Authorities in the chemistry, manufacturing and controls section of an IND or other regulatory filing in the United States, or the equivalent section of regulatory filings made outside of the United States.

1.1.20 “Claims” means any and all suits, claims, actions, proceedings or demands brought by a Third Party.

1.1.21 “Commercialization” or “Commercialize” means any activities directed to using, marketing, promoting, distributing, importing, offering to sell and/or selling a product, after or in expectation of receipt of Regulatory Approval for such product (but excluding Development).

1.1.22 “Commercially Reasonable Efforts” means, with respect to the performing Party under this Agreement or any Development & Commercialization Agreement, [**].

1.1.23 “Companion Diagnostic” means a biomarker or diagnostic test that is developed by a Party or jointly by the Parties in the course of the Collaboration as a companion diagnostic for use with a Program Compound or Program Product in accordance with the Regulatory Approval(s) therefor to generate a result for the purposes of diagnosing a disease or condition, or to facilitate the application of the Program Compound or Program Product in the cure, mitigation, treatment, or prevention of disease, including a biomarker or diagnostic test used to diagnose the likelihood that a specific patient will contract a disease or condition or to predict which patients are suitable candidates for a specific form of therapy using the Program Compound or Program Product.

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1.1.24 “Confidential Information” means (a) all confidential or proprietary information relating to any Program Target(s), Program Compound(s) or Program Product(s), including information in the Data Packages, and (b) all other confidential or proprietary documents, technology, Know-How or other information (whether or not patentable) actually disclosed by one Party to the other pursuant to this Agreement, the 2010 Agreement (solely with respect to information relating to the [**]) or the Prior Confidentiality Agreement, including information regarding a Party’s technology, products, business information or objectives and reports under Section 2.7, and all proprietary biological materials of a Party.

1.1.25 “Continuation Program” means a Research Program under which Agios may continue to carry out Development activities directed to the identification and nomination of a Development Candidate as of the end of the Research Term and that Celgene designates as a Continuation Program in accordance with Section 2.4.2.

1.1.26 “Control” or “Controlled” means, with respect to any (a) Know-How or other information or materials, (b) any compounds, or (c) intellectual property right, the possession (whether by license (other than a license granted under this Agreement) or ownership) by a Party of the ability to grant to the other Party access and/or a license, as provided herein, without violating the terms of any agreement with any Third Party existing as of the Effective Date or thereafter during the Term. Notwithstanding the foregoing, for the purpose of defining whether intellectual property, Patents, Know-How or Confidential Information is Controlled by a Party, if such intellectual property, Patents, Know-How or Confidential Information is first acquired, licensed or otherwise made available to such Party after the Effective Date, or the effective date of the applicable Development & Commercialization Agreement, as applicable, and if the use, practice or exploitation thereof by or on behalf of the other Party, its Affiliates or sublicensees would require the first Party to pay any amounts to the Third Party from which the first Party acquired, licensed or otherwise obtained such intellectual property, Patents, Know-How or Confidential Information (“Additional Amounts”), such intellectual property, Patents, Know-How or Confidential Information shall be deemed to be Controlled by the first Party only if the other Party agrees to pay (if necessary) and does in fact pay all Additional Amounts with respect to such other Party’s use of or license to such intellectual property, Patents, Know-How or Confidential Information to the extent specified in this Agreement or the applicable Development & Commercialization Agreement.

1.1.27 “Cover,” “Covering” or “Covered” means that, with respect to a product or technology, but for a license granted to a Person under the Patents under which such license is granted, the Development, Manufacture, Commercialization or other use of such product or practice of such technology by such Person would infringe a claim of any such Patents or, with respect to a claim included in any patent application, would infringe such claim if such patent application were to issue as a patent.

1.1.28 “Damages” means all claims, threatened claims, damages, losses, suits, proceedings, liabilities, costs (including reasonable legal expenses, costs of litigation and reasonable attorney’s fees), or judgments, whether for money or equitable relief, of any kind and is not limited to matters asserted by Third Parties against a Party, but includes claims, threatened claims, damages, losses, suits, proceedings, liabilities, costs (including reasonable legal expenses, costs of litigation and reasonable attorney’s fees) or judgments incurred or sustained

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by a Party in the absence of Third Party claims; provided that no Party shall be liable to hold harmless or indemnify the Agios Indemnified Parties or Celgene Indemnified Parties, as applicable, for any claims, threatened claims, damages, losses, suits, proceedings, liabilities, costs or judgments for punitive or exemplary damages, except to the extent the Party seeking indemnification is actually liable to a Third Party for such punitive or exemplary damages in connection with a claim by such Third Party.

1.1.29 “Data Package” means, on a Program-by-Program basis, a data package prepared in accordance with the terms and conditions of this Agreement (including Section 1.1.62) by Agios with respect to Development activities conducted under a Program and provided by Agios to Celgene upon the occurrence of the following events:

[**]

The foregoing Data Packages shall contain the applicable information outlined in Schedule 1.1.29 for such Data Package, in a form reasonable under the circumstances.

1.1.30 “Defense” means any actions brought to defend a Patent against a challenge to such Patent, including without limitation interferences, oppositions, reexaminations, inter partes reviews or post-grant reviews, excluding any actions included within Prosecution. “Defend” will have the correlative meaning.

1.1.31 “Designated Development Program” means a Research Program that has been designated by Celgene as a Designated Development Program in accordance with Section 2.3.2(b).

1.1.32 “Develop” or “Development” means discovery, research, preclinical, non-clinical and clinical development activities, including activities relating to screening, assays, test method development and stability testing, toxicology, pharmacology, formulation, quality assurance/quality control development, clinical trials (including Phase IV clinical trials), technology transfer, statistical analysis, process development and scale-up, pharmacokinetic studies, data collection and management, report writing and other pre-Regulatory Approval activities.

1.1.33 “Development & Commercialization Agreement” means an agreement in the form attached hereto as Appendix A (“Co-Development and Co-Commercialization Agreement”) or in the form attached hereto as Appendix B (“License Agreement”), as applicable.

1.1.34 “Development Candidate” means, on a Program-by-Program basis, a Program Compound in such Program that is (a) Developed by or on behalf of Agios or any of its Affiliates prior to or after the Effective Date until expiration of the Option Term and (b) nominated by either Agios or Celgene in accordance with Section 2.3.1 and has been determined or deemed, as applicable, to meet the Development Candidate Criteria pursuant to Section 2.3.2(a).

1.1.35 “Development Candidate Criteria” means the criteria set forth in Schedule 1.1.35.

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1.1.36 “Dollars” or “$” means the legal tender of the United States.

1.1.37 “Executive Officers” means Celgene’s Chief Executive Officer (or the officer or employee of Celgene then serving in a substantially equivalent capacity) or his designee and Agios’ Chief Executive Officer (or the officer or employee of Agios then serving in a substantially equivalent capacity) or his designee; provided that any such designee must have decision-making authority on behalf of the applicable Party.

1.1.38 “FDA” means the United States Food and Drug Administration, or any successor agency thereof.

1.1.39 “FDCA” means the United States Federal Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, each as amended from time to time.

1.1.40 “FTE” means the equivalent of the work of one (1) full-time employee of a Party or its Affiliates for one (1) year (consisting of [**] hours per year) in directly conducting Development, Manufacturing and/or Commercialization activities hereunder. Any Party’s employee who devotes fewer than [**] hours per year on the applicable activities shall be treated as an FTE on a pro-rata basis, calculated by dividing the actual number of hours worked by such employee on such activities by [**]. Any employee who devotes more than [**] hours per year on the applicable activities shall be treated as one (1) FTE. For the avoidance of doubt, FTE shall not include the work of general corporate or administrative personnel, except for the portion of such personnel’s work time actually spent on conducting scientific, technical or commercial activities directly related to the Development, Manufacture or Commercialization of Program Products.

1.1.41 “FTE Rate” means, during the Term: (a) with respect to Development activities, $[**] per FTE and (b) with respect to Commercialization activities, $[**] per FTE. On January 1, 2017 and on January 1^st of each subsequent Calendar Year, the foregoing rate shall be increased for the Calendar Year then commencing by the percentage increase, if any, in the Consumer Price Index (“CPI”) as of December 31 of the then most recently completed Calendar Year with respect to the level of the CPI on December 31, 2015. As used in this definition, Consumer Price Index or CPI means the Consumer Price Index – Urban Wage Earners and Clerical Workers, US City Average, All Items, 1982-84 = 100, published by the United States Department of Labor, Bureau of Labor Statistics (or its successor equivalent index).

1.1.42 “Good Clinical Practices” or “GCP” means the ethical and scientific quality standards for designing, conducting, recording, and reporting trials that involve the participation of human subjects as are required by applicable Regulatory Authorities or Law in the relevant jurisdiction. In the United States, GCP shall be based on Good Clinical Practices established through FDA guidances (including Guideline for Good Clinical Practice – ICH Harmonized Tripartite Guideline (ICH E6)), and, outside the United States, GCP shall be based on Guideline for Good Clinical Practice – ICH Harmonized Tripartite Guideline (ICH E6).

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1.1.43 “Good Laboratory Practices” or “GLP” means the then-current good laboratory practice standards promulgated or endorsed by the FDA, as defined in U.S. 21 C.F.R. Part 58 (or such other comparable regulatory standards in jurisdictions outside the United States, as they may be updated from time to time).

1.1.44 “Good Manufacturing Practices” or “GMP” means all applicable standards relating to manufacturing practices for fine chemicals, intermediates, bulk products and/or finished pharmaceutical products, including (a) all applicable requirements detailed in the FDA’s current Good Manufacturing Practices regulations, U.S. 21 C.F.R. Parts 210 and 211 and “The Rules Governing Medicinal Products in the European Community, Volume IV, Good Manufacturing Practice for Medicinal Products”, as each may be amended from time to time, and (b) all applicable Laws promulgated by any Governmental Authority having jurisdiction over the Manufacture of any Post-Exercise Product.

1.1.45 “Governmental Authority” means any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (d) multinational organization or body; or (e) individual, entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

1.1.46 “I&I Field” means the treatment, prevention or palliation of Indications in which there is an immune system dysregulation, including, without limitation, an inappropriate or excessive immune response against normal tissue present in the body such that the immune system recognizes such normal tissue cells as non-self.

1.1.47 “I&I Program” means any Post-Exercise Program (assuming exercise of an Option) that would not be an IO Program.

1.1.48 “IND” means any Investigational New Drug application, filed with the FDA pursuant to Part 312 of Title 21 of the U.S. Code of Federal Regulations, including any supplements or amendments thereto. References herein to IND shall include, to the extent applicable, any comparable filing(s) outside the United States (such as a Clinical Trial Application (“CTA”) in the countries that are officially recognized as member states of the EU).

1.1.49 “Indication” means any human disease, condition or syndrome, or sign or symptom of, or associated with, a human disease, condition or syndrome.

1.1.50 “Inventions” means all inventions, whether or not patentable, that are designed, discovered, generated, invented or conceived by or on behalf of either Party or its respective Affiliates or both Parties or their respective Affiliates, whether solely or jointly with any Third Party, in the course of activities performed under this Agreement or any Development & Commercialization Agreement, as applicable.

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1.1.51 “IO Field” means the treatment, prevention or palliation of oncology and/or hematologic malignancy Indications through the use of immunotherapies, the efficacy of which is demonstrated to be mediated primarily through the immune system.

1.1.52 “IO Program” means any Post-Exercise Program (assuming exercise of an Option) for which, based upon then-current good scientific practice and understanding (taking into account published studies and industry-generated, Agios-generated or Celgene-generated data), at the time of exercise of such Option, the initial contemplated Indication would be in the IO Field.

1.1.53 “Joint Collaboration IP” means, collectively:

(a) “Joint Collaboration Know-How,” which means all Know-How, including physical embodiments of Program Compound(s), Program Product(s) and Companion Diagnostics, that is discovered, generated or invented by or on behalf of both Parties or their respective Affiliates, whether solely or jointly with any Third Party, pursuant to the conduct of activities under the Collaboration at any time during the Term; and

(b) “Joint Collaboration Patents,” which means Patents that Cover any Joint Collaboration Know-How.

1.1.54 “Know-How” means any tangible or intangible trade secrets, know-how, expertise, discoveries, inventions, information, data or materials, including ideas, concepts, formulas, methods, procedures, designs, technologies, compositions, plans, applications, technical data, assays, manufacturing information or data, samples, chemical and biological materials and all derivatives, modifications and improvements thereof.

1.1.55 “Law” means any law, statute, rule, regulation, ordinance or other pronouncement having the effect of law, of any federal, national, multinational, state, provincial, county, city or other political subdivision, as from time to time enacted, repealed or amended, including Good Clinical Practices and adverse event reporting requirements, guidance from the International Conference on Harmonization or other generally accepted conventions, the FDCA and similar laws and regulations in countries outside the United States, and all other rules, regulations and requirements of the FDA and other applicable Regulatory Authorities.

1.1.56 “Licensed Product” means a Program Product that is the subject of a Licensed Program.

1.1.57 “Licensed Program” means a Post-Exercise Program as to which the Parties have entered into a License Agreement.

1.1.58 “Manufacture” or “Manufacturing” means, as applicable, all activities associated with the production, manufacture, processing, filling, packaging, labeling, shipping and storage of a drug substance or drug product, and/or any components thereof, including process and formulation development, process validation, stability testing, manufacturing scale-up, preclinical, clinical and commercial manufacture and analytical methods development and validation, product characterization, quality assurance and quality control development, testing and release.

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1.1.59 “[**]” means [**].

1.1.60 “[**]” means [**].

1.1.61 “Metabolic Target” means any one or more isoforms or mutated forms of a metabolic enzyme (or any combination thereof) that interconverts specific metabolites, or a transporter (including isoforms or mutated forms) that transports specific metabolites into or out of a cell or a subcellular compartment. For the avoidance of doubt, Metabolic Target will exclude, for example, [**]. The Parties understand and agree that, subject to the terms and conditions of Section 2.1.1(d), any one or more isoforms or mutated forms of a metabolic enzyme (or any combination thereof) that interconverts specific metabolites, or a transporter (including isoforms or mutated forms) that transports specific metabolites into or out of a cell or a subcellular compartment shall be deemed to be one “Metabolic Target” under this Agreement. Subject to the terms and conditions of Section 2.1.1(d), isoforms may be considered by the JSC to be separated into distinct Metabolic Targets if (a) [**] and (b) [**].

1.1.62 “Option Data Package Verification Date” means, with respect to an Option Data Package, the date that is [**] days after the date of receipt by Celgene of such Option Data Package; provided that, if Celgene requests additional reasonable information and clarifications during such [**] day period, then such [**] day period will be automatically extended (as necessary) until the later of (a) [**] days following receipt by Celgene (or any designee) of such additional reasonable information and clarifications are supplied by Agios and (b) the original [**] day period.

1.1.63 “Option Exercise Notice” means, on a Program-by-Program basis, the written notice provided to Agios by Celgene pursuant to Section 3.1.2(a), such notice constituting Celgene’s exercise of its Option with respect to a Qualified Early Exercise I&I Program, Designated Development Program or a Continuation Program to convert it into a Post-Exercise Program.

1.1.64 “Option Term” means the period commencing on the Effective Date and ending on the later of (a) the expiration of the Research Term or (b) the expiration of the last-to-expire Option Exercise Window for any Continuation Program or any Designated Development Program; provided, however, that the Option Term shall not extend after January 1, 2030.

1.1.65 “Patent” means (a) patents and patent applications anywhere in the world, (b) all divisionals, continuations, continuations in-part thereof or any other patent application claiming priority, or entitled to claim priority, directly or indirectly to (i) any such patents or patent applications or (ii) any patent or patent application from which such patents or patent applications claim, or is entitled to claim, direct or indirect priority, and (c) all patents issuing on any of the foregoing anywhere in the world, together with all registrations, reissues, re-examinations, patents of addition, renewals, patent term extensions, supplemental protection certificates, or extensions of any of the foregoing anywhere in the world.

1.1.66 “Person” means any corporation, limited or general partnership, limited liability company, joint venture, trust, unincorporated association, governmental body, authority, bureau or agency, any other entity or body, or an individual.

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1.1.67 “Phase I Study” means a human clinical trial of a product, the principal purpose of which is a preliminary determination of safety, tolerability and pharmacokinetics in study subjects where potential pharmacological activity may be determined or similar clinical study prescribed by the Regulatory Authorities, from time to time, pursuant to applicable Law or otherwise, including for example the trials referred to in 21 C.F.R. §312.21(a), as amended (or the non-United States equivalent thereof).

1.1.68 “Phase II Study” means a human clinical trial intended to explore a variety of doses, dose response, and duration of effect, and to generate evidence of clinical safety and effectiveness for a particular Indication or Indications in a target patient population, or a similar clinical study prescribed by the relevant Regulatory Authorities, from time to time, pursuant to applicable Law or otherwise, including for example the trials referred to in 21 C.F.R. §312.21(b), as amended (or the non-United States equivalent thereof).

1.1.69 “Phase III Study” means a human clinical trial of a product in any country that would satisfy the requirements of 21 C.F.R. §312.21(c), as amended (or the non-United States equivalent thereof) and is intended to (a) establish that the product is safe and efficacious for its intended use, (b) define contraindications, warnings, precautions and adverse reactions that are associated with the product in the dosage range to be prescribed, and (c) support Regulatory Approval for such product.

1.1.70 “Pivotal Clinical Trial” means a human clinical trial of a product on a sufficient number of subjects that, prior to commencement of the trial, satisfies both of the following ((a) and (b)):

(a)

such trial is designed to establish that such product has an acceptable safety and efficacy profile for its intended use, and to determine warnings, precautions, and adverse reactions that are associated with such product in the dosage range to be prescribed, which trial is intended to support Regulatory Approval of such product, or a similar clinical study prescribed by the U.S. or EMA; and

(b)

such trial is a registration trial designed to be sufficient to support the filing of an application for a Regulatory Approval for such product in the U.S. or another country or some or all of an extra-national territory, as evidenced by (i) an agreement with or statement from the FDA or the EMA on a Special Protocol Assessment or equivalent, or (ii) other guidance or minutes issued by the FDA or EMA, for such registration trial.

1.1.71 “Post-Exercise Product” means a Shared Product or a Licensed Product, as applicable.

1.1.72 “Post-Exercise Program” means a Qualified Early Exercise I&I Program, Designated Development Program or Continuation Program, in each case as to which Celgene has exercised its Option.

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1.1.73 “Pre-Exercise Phase I Development” means:

(a)

for any Indication in the IO Field, the conduct of a first Phase I Study of a first Development Candidate of a Designated Development Program or a Continuation Program through a single-agent, dose-escalation Phase I Study, [**] data to warrant advancing the Program Compound, if appropriate, to combination and/or Phase II Studies [**] and preclinical Development necessary to enable the conduct of such Phase I Study; and

(b)

for any Indication in the I&I Field, “Pre-Exercise Phase I Development” means the conduct of (I) first single ascending dose and multiple ascending dose Phase I Studies of a first Development Candidate of a Designated Development Program or a Continuation Program in [**] data to warrant advancing the Program Compound, if appropriate, to combination and/or further Phase II Studies. Notwithstanding the foregoing or anything to the contrary herein or in any applicable License Agreement, as to any Qualified Early Exercise I&I Program as to which Celgene exercises its Option as set forth in Section 3.1.1(b), Pre-Exercise Phase I Development shall be deemed to have been completed, and Agios shall have no responsibility therefor (including for any applicable Ongoing Clinical Trial (as defined in Appendix B) hereunder or under the applicable License Agreement following such early Option exercise by Celgene.

1.1.74 “Pre-Exercise Program” means a Research Program, Designated Development Program, or Continuation Program.

1.1.75 “Prior Confidentiality Agreement” means the Mutual Confidentiality Agreement between Agios and Celgene, dated as of December 16, 2015.

1.1.76 “Program” means a Pre-Exercise Program or a Post-Exercise Program.

1.1.77 “Program Compound” means a chemical entity (including any salt, fluorinated derivative, free acid, free base, clathrate, solvate, hydrate, hemihydrates, anhydride, ester, chelate, conformer, congener, crystal form, crystal habit, polymorph, amorphous solid, isomer, stereoisomer, enantiomer, racemate, prodrug, isotopic or radiolabeled equivalent, metabolite, conjugate, complex or mixture of such chemical entity, each a “Related Compound”) Developed or Controlled by Agios or any Affiliates identified as [**], as of the date of its inclusion in a Program or thereafter found to have such activity (whether or not during the Research Term or, in the case of any Related Compound, during or after the Research Term) against a Program Target, in the applicable direction of modulation, in the course of conducting a Program. For the avoidance of doubt, Compounds (as defined in Appendix A or Appendix B) shall be limited to (a) the Program Compounds that the Parties reasonably agree at the time of Option exercise are Active against the applicable Program Target and are listed on Exhibit A to the applicable Development & Commercialization Agreement, which, for the avoidance of doubt, shall include the applicable Development Candidate and (b) such other Compounds (as defined in Appendix A or Appendix B) that are Active against the applicable Program Target.

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1.1.78 “Program Product” means a product that contains as an active ingredient a Program Compound.

1.1.79 “Program Target” means a Metabolic Target that, together with Program Compounds that are either activators or inhibitors of such Metabolic Target, is the focus of a Program. For clarity, each Program will only include activators or inhibitors, but not both, of a Metabolic Target, but if a Metabolic Target is the focus of both an activator Program and an inhibitor Program, such Metabolic Target shall be deemed a Program Target of each such Program.

1.1.80 “Prosecution” or “Prosecute” means the filing, preparation, prosecution and maintenance of Patents, including any and all pre-grant proceedings before any patent authority, such as interferences.

1.1.81 “Publication” means any publication in a scientific journal, any scientific abstract to be presented to any audience, any presentation at any scientific conference, including slides and texts of oral or other public presentations, any other scientific presentation and any other oral, written or electronic scientific disclosure directed to any audience that pertains to any Program Target(s), Program Compound(s) or Program Product(s), or the use of any of the foregoing, or the data or result from any work under any Program.

1.1.82 “Publication Guidelines” means the criteria for Publication set forth on Schedule 1.1.82.

1.1.83 “Qualified Early Exercise I&I Program” means a Research Program that, at the time of Celgene’s exercise of its Option therefor pursuant to Section 3.1.1(b), (a) has achieved the criteria set forth in Schedule 1.1.83, (b) does not include any Program Compounds that have been nominated or designated as Development Candidates in accordance with Section 2.3.1 or 2.3.2, (c) includes Program Compounds that have been identified as having potential application in the I&I Field and (d) does not include Program Compounds that are being Developed in the conduct of the Collaboration for potential application in the IO Field. Notwithstanding the foregoing, once Celgene has exercised its Option as to [**] Qualified Early Exercise I&I Programs in accordance with Section 3.1.1(b), no other Research Programs shall be Qualified Early Exercise I&I Programs, and Celgene shall have no further right to exercise Options therefor under Section 3.1.1(b).

1.1.84 “Regulatory Approval” means all approvals of the applicable Regulatory Authority necessary for the commercial marketing and sale of a product for a particular indication in a country (including separate Regulatory Authority pricing or reimbursement approvals whether or not legally required in order to sell the product in such country, it being understood that, as of the Effective Date, no such Regulatory Authority pricing or reimbursement approval requirement is applicable in the United States).

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1.1.85 “Regulatory Authority” means a federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the testing, manufacture, use, storage, import, promotion, marketing or sale (including pricing and reimbursement approval) of a product in a country or territory.

1.1.86 “Research Program” means a program comprising Development activities by and on behalf of Agios and its Affiliates directed to a Program Target and Program Compounds that are either activators of the Program Target or inhibitors of the Program Target (i.e., if both activators and inhibitors of a Program Target will be pursued, each will be deemed as a separate Research Program) in the IO Field or I&I Field; it being understood and agreed that (a) the JRC shall, from time to time, designate each such program as a Research Program in accordance with Section 2.2.1 (but any failure of the JRC to so designate shall not affect in any way the designation of any such program as a “Research Program” or prevent Celgene from exercising an Option under this Agreement); (b) each Research Program may be conducted pursuant to a research plan (which Agios may prepare and may be amended from time to time by the JRC pursuant to ARTICLE IV) governing the activities of the Collaboration to be conducted by Agios and its Affiliates (and, with Celgene’s prior written consent, Celgene and its Affiliates) during the Option Term (each such research plan, the “Research Plan”), and (c) any failure to include any Development activities directed to a Program Target and Program Compounds in a Research Plan shall not, in any way, exclude such activities from constituting a Research Program or prevent Celgene from exercising an Option under this Agreement. The [**]Program and the [**] Program shall be deemed to be Research Programs as of the Effective Date.

1.1.87 “Research Term” means the period commencing on the Effective Date and, unless earlier terminated in accordance with this Agreement, if Celgene does not exercise its option to extend the Research Term pursuant to Section 2.1.2, ending on the fourth (4^th) anniversary of the Effective Date, or, if Celgene exercise its option(s) to extend the Research Term pursuant to Section 2.1.2, ending on the fifth (5^th), sixth (6^th), seventh (7^th) or eighth (8^th) anniversary of the Effective Date, as applicable.

1.1.88 “Shared 50/50 Program” means a Post-Exercise Program as to which the Parties are required hereunder, or have, entered into a Co-Development and Co-Commercialization Agreement pursuant to which Profit or Loss (as defined in Appendix A) is allocated fifty percent (50%) to Celgene and fifty percent (50%) to Agios.

1.1.89 “Shared 65/35 Program” means the Post-Exercise Program as to which the Parties are required hereunder, or have, entered into a Co-Development and Co-Commercialization Agreement pursuant to which Profit or Loss (as defined in Appendix A) is allocated sixty-five percent (65%) to Celgene and thirty-five percent (35%) to Agios.

1.1.90 “Shared Product” means a Program Product that is the subject of a Shared Program (including any such Program Product after an Agios Opt-Out Date (as defined in Appendix A) with respect to such Program Product pursuant to a Co-Development and Co-Commercialization Agreement).

1.1.91 “Shared Program” means the Shared 65/35 Program or a Shared 50/50 Program.

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1.1.92 “[**]” means [**].

1.1.93 “[**] Program” means the Agios program conducted before the Effective Date and during the Term and comprising Development activities directed to inhibition of the Program Target [**].

1.1.94 “Third Party” means any Person other than Agios or Celgene or each Party’s respective Affiliates.

1.1.95 “United States” or “U.S.” means the United States of America and all of its territories and possessions, including Puerto Rico.

1.2 Additional Definitions. Each of the following terms has the meaning described in the corresponding section of this Agreement indicated below:


		DEFINITION:		SECTION:
		[**]		5.2.3(c)
		Accounting Standards		Appendix C
		Acquirer Program		5.2.3(e)(iv)
		Additional Amounts		1.1.26
		Agios		Preamble
		Agios Indemnified Parties		10.1.1
		Agios Program Assets		9.3.2
		Agreement		Preamble
		Alliance Manager		4.7
		Alternating Mechanism		3.1.2(c)
		Antitrust Clearance Date		3.2.2
		Bankruptcy Code		5.1.7
		Celgene		Preamble
		Celgene Corp.		Preamble
		Celgene Indemnified Parties		10.2.1
		Celgene RIVOT		Preamble
		Closed Target		2.1.1(f)
		Closed Target Notice		2.1.1(f)
		Co-Co Agreement		9.3.1(e)(ii)
		Co-Development and Co-Commercialization Agreement		1.1.33
		Collaboration		2.1
		Committee		4.1.1
		Competitive Program		5.2.3(d)
		Competitive Program Party		5.2.3(d)
		Control		1.1.3
		Cooperating Party		8.3.2(c)
		CPI		1.1.41
		CTA		1.1.48
		Cure Period		11.3.1

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		DEFINITION:		SECTION:
		Deemed DC Program		2.4.3
		Defend		1.1.30
		Designation Fee		6.2
		Development Candidate Nomination Data Package		1.1.29(a)
		Development Costs		Appendix C
		Disclosing Party		8.1
		Dispute		12.1
		DOJ		3.2.2
		Early Option Exercise Window		3.1.1(b)
		Effective Date		Preamble
		Electronic Delivery		12.14
		End-of-Research Term Program Data Package		1.1.29(b)
		EU		1.1.8
		force majeure event		12.5
		FTC		3.2.2
		[**]		5.2.3(e)(ii)
		HSR Act		1.1.8
		HSR/Antitrust Filing		3.2.2
		Implementation Date		3.2.2
		[**]		6.6.1
		JCC		4.1.1
		JDC		4.1.1
		JPC		4.1.1
		JRC		4.1.1
		JSC		4.1.1
		License Agreement		1.1.33
		Limited Information		2.1.1(f)
		Manufacturing Costs		Appendix C
		Material Breach		11.3.1
		Material Receiving Party		2.11.1
		Materials		2.11.1
		Option		3.1.1(a)
		Option Data Package		1.1.29(c)
		Option Exercise Window		3.1.1(a)
		Out-of-Pocket Costs		Appendix C
		Parent Entity		1.1.18
		Party or Parties		Preamble
		Payee Party		6.6.1
		Paying Party		6.6.1
		Productivity Requirement		2.1.2(b)
		Proposed Targets		2.1.1(c)

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		DEFINITION:		SECTION:
		Purpose		2.11.1
		Qualified Scientist		2.1.1(d)
		Receiving Party		8.1
		Redacted Version		8.3.2(a)
		Regulatory Expenses		Appendix C
		Related Compound		1.1.77
		Requesting Party		8.3.2(c)
		Research Plan		1.1.86(b)
		ROW Co-Co Agreement		9.3.1(e)(i)
		Research Term Extension Fee		6.3
		Scientific Panel		2.1.1(d)
		SEC		8.3.2(a)
		Subcommittee		4.1.2
		Term		11.1
		Third Party License		7.5.2
		Third Party Program		2.2.2
		Transferring Party		2.11.1
		U.S. Co-Co Agreement		9.3.1(e)(i)

ARTICLE II

COLLABORATION; PRE-OPTION EXERCISE DEVELOPMENT

2.1 Scope and Collaboration Overview. Pursuant to this Agreement and as further provided in this ARTICLE II, during the Research Term, Agios: (a) may conduct discovery activities to identify programs for designation as Research Programs and shall provide regular updates to Celgene at JRC meetings in accordance with ARTICLE IV with respect to its activities pursuant to each Research Program, together with all material data and information in Agios’ possession relating to Program Targets, (b) shall be responsible for the research strategy and the conduct of activities under each Research Program, (c) may nominate Program Compounds from Research Programs as Development Candidates pursuant to the terms and conditions of this Agreement, and (d) as to Development Candidates in Designated Development Programs and Continuation Programs, may conduct Pre-Exercise Phase I Development. The activities conducted pursuant to this ARTICLE II, the activities performed by a Party or the Parties relating to the [**] Program and the [**] Program under the 2010 Agreement before the Effective Date, as well as activities conducted pursuant to Development & Commercialization Agreements following Celgene’s exercise of its Option rights, together, shall be the “Collaboration”.

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2.1.1 Agios Responsibility for Research and Pre-Option Exercise Development.

(a) Commencing on the Effective Date, during the Research Term prior to the exercise by Celgene of an Option on a Program-by-Program basis, Agios may, in its discretion, conduct Development activities with respect to each Program with the goal of identifying Development Candidates and Developing and progressing such Development Candidates in Designated Development Programs and Continuation Programs through Pre-Exercise Phase I Development. During the Research Term, Agios shall have sole discretion regarding which Programs it selects to progress, and the Development activities performed thereunder, and following Celgene’s designation of a Designated Development Program pursuant to Section 2.3.2(b), Agios (x) may conduct Pre-Exercise Phase I Development and (y) shall offer Celgene the opportunity to obtain rights to the applicable Designated Development Program through the exercise of Celgene’s Option in accordance with ARTICLE III. Following Celgene’s designation of a Continuation Program in accordance with Section 2.4.2, Agios (i) may conduct Development activities with the goal of identifying and nominating a Program Compound from such Continuation Program as a Development Candidate and, pursuant to Section 2.4.3, conduct Pre-Exercise Phase I Development, and (ii) shall offer Celgene the opportunity to obtain the rights to the applicable Continuation Program through the exercise of Celgene’s Option in accordance with ARTICLE III. Agios may decide to cease activities under any Program it conducts prior to the exercise of the Option by Celgene at any time (and, for clarity, no such cessation of activity shall in any way affect Celgene’s rights to exercise such Option under this Agreement).

(b) During the Research Term, Agios shall discuss with Celgene, on a regular basis at JRC meetings, Metabolic Targets as potential Program Targets identified by Agios in the course of its ongoing research activities in the IO Field and I&I Field as well as discuss with Celgene material developments in or new data or information in Agios’ possession and Control relating to previously identified Metabolic Targets; provided that Agios shall not have any obligation to discuss with Celgene any developments, data or information relating to Programs that have reverted to Agios pursuant to Section 2.12.

(c) Beginning with the first meeting of the JRC and at every other JRC meeting thereafter during the Research Term (meaning [**]): (i) Agios shall prepare and the Parties shall review a list of any Metabolic Targets for which activities would be the subject of a Research Program in the next [**], including any Metabolic Target suggested by Celgene which Agios may consider in its sole discretion (collectively, the “Proposed Targets”) and any available reports, data and other information related thereto; and (ii) for each Proposed Target, the Parties shall discuss whether to include such Proposed Target in a Research Plan as a Program Target.

(d) If during the Research Term either (but not both) of the Parties believes that [**], then the Parties agree to submit such matter to a panel of three Qualified Scientists (each and every such panel of three Qualified Scientists, a “Scientific Panel”) appointed as provided in this Section 2.1.1(d) to determine whether or not [**], all in accordance with the procedures as provided in this Section 2.1.1(d); it being understood and agreed that, in connection with any review and determination by the Scientific Panel, the Scientific Panel will render a decision that is consistent with the definition of Metabolic Target as to whether or not any [**] under this Agreement. Within [**] following any such request for a Scientific Panel,

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each of Agios and Celgene shall nominate a Qualified Scientist to participate on the applicable Scientific Panel and, if the Parties are unable to agree upon a third Qualified Scientist for such Scientific Panel within [**] following any such request for a Scientific Panel, then the initial two Qualified Scientists shall select such third Qualified Scientist. Each Scientific Panel shall act as follows: (i) each Qualified Scientist (and the Scientific Panel as a whole) shall act as an expert and not as an arbitrator; (ii) each decision of the Scientific Panel shall be by majority vote of the three Qualified Scientists; and (iii) the decision of the Scientific Panel is, in the absence of fraud or manifest error, final and binding on the Parties. The costs of the Scientific Panel shall be shared equally by Agios and Celgene. For purposes of this Agreement, a “Qualified Scientist” shall mean any scientist (A) with at least ten (10) years of applicable pharmaceutical industry experience in the IO Field or I&I Field, (B) who has not worked for or been engaged by either Party in the three (3) year period immediately prior to the formation of the applicable Scientific Panel, and (C) who does not own equity in either Party. If such Scientific Panel determines that any [**] (based upon the terms and conditions of this Agreement and then-current good scientific practice and understanding, data generated, and the proposed discovery and development research plan with respect to such Program), then each such different Metabolic Target shall be deemed part of different Research Programs. Conversely, if such Scientific Panel determines that [**] (based upon the terms and conditions of this Agreement and then-current good scientific practice and understanding, data generated, and the proposed discovery and development research plan with respect to such Program), then only one Metabolic Target shall be deemed to exist as part of one Research Program.

(e) The Parties understand and agree that in no event shall a Party be entitled to request that a Scientific Panel review any matter for which a Scientific Panel has previously rendered a decision in accordance with Section 2.1.1(d).

(f) Notwithstanding anything to the contrary contained herein, Celgene shall be entitled to designate, in a written notice (“Closed Target Notice”) to Agios, any Metabolic Target or Proposed Target, or Program Target as a Metabolic Target for which Celgene wishes to receive specified or no additional information and/or to have a Third Party designee receive and review such information (any such designated Target, a “Closed Target”); it being understood and agreed that Celgene shall be entitled to modify (i) the designation of any Closed Target such that the corresponding Metabolic Target is no longer a Closed Target, and (ii) the information restrictions and recipients then-imposed with respect to such Closed Target. In each initial Closed Target Notice and in any subsequent modifications to such Closed Target Notice, Celgene shall include (x) the identity of the corresponding Closed Target, (y) a detailed written description of the limited information, if any, that Celgene wishes to receive for such Closed Target (such limited information the “Limited Information”), and (z) the identity and address of Celgene’s designee (if any) that Celgene wishes to receive the Limited Information.

2.1.2 Extension of Research Term.

(a) Initial Extension Right. Celgene may, at its election, extend the Research Term for up to two (2) one (1) year extension periods (each to run consecutively after the end of the then-current Research Term) by giving notice to Agios of each such election at least [**] prior to the expiration of the then-current Research Term and paying the Research Term Extension Fee as set forth in Section 6.3.

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(b) Productivity Extension Right. If (i) Celgene has elected to extend the Research Term for both of the foregoing one (1) year extension periods as provided in Section 2.1.2(a), and (ii) [**] prior to the sixth (6^th) anniversary of the Effective Date, Celgene has not designated at least [**] Program Compounds for [**] different Research Programs (other than Program Compounds that are inhibitors of [**] or [**]) as Development Candidates pursuant to Section 2.3.2(b), which have been (in the case of each such [**] Program Compounds) dosed in a patient as part of a Phase I Study (the “Productivity Requirement”), then Celgene may, at its election, extend the Research Term for an additional one (1) year period (to run after the end of the then-current Research Term) by providing notice to Agios of such election at least [**] prior to the sixth (6^th) anniversary of the Effective Date and paying the Research Term Extension Fee as set forth in Section 6.3. If, prior to the seventh (7^th) anniversary of the Effective Date, the Productivity Requirement has still not been satisfied, then Celgene may, at its election, extend the Research Term for one (1) additional year, by providing notice to Agios of such election at least [**] prior to the seventh (7^th) anniversary of the Effective Date and paying the Research Term Extension Fee as set forth in Section 6.3.

2.2 Designation of Research Programs.

2.2.1 Designation of Research Programs. From time to time during the Research Term, each Party may identify potential Research Programs and recommend them to the JRC for designation as Research Programs. The JRC shall review such recommendations and determine whether or not to designate each proposed Research Program in accordance with Section 4.3.2(a). If Celgene’s JRC representatives oppose the designation of a Research Program, but such designation occurs in accordance with the escalation and final decision-making provisions of ARTICLE IV, then Celgene may, by giving notice of such election to Agios within [**] after the designation of such Research Program, elect to drop such Research Program from the Collaboration, in which case all rights thereto shall revert to Agios in accordance with Section 2.12 and such Research Program shall otherwise be treated as never having been included in the Collaboration. Except as provided in the immediately preceding sentence, no failure by Agios to identify or the JRC to approve any Development activities by and on behalf of Agios and its Affiliates directed to a Program Target and Program Compounds that are either activators or inhibitors of such Program Target in the IO Field or I&I Field as contemplated by this Section 2.2.1 shall prevent such Development activities from being deemed a “Research Program” (and, accordingly, Celgene shall have an Option for any such Research Program under this Agreement).

2.2.2 Third Party Programs. During the Research Term, if Agios identifies a Third Party research and development program, or Third Party intellectual property assets that could be used as the basis for a research and development program, in each case in the IO Field or in the I&I Field (each such program or assets, a “Third Party Program”), which Third Party Program Agios desires to license or acquire for designation as a Program hereunder, Agios may license or acquire such Third Party Program, in which case such Third Party Program shall be designated as a Program hereunder and, except as specifically set forth in any Development & Commercialization Agreement, all licensing costs and expenses relating to such Third Party Program shall be paid for by Agios.

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2.3 Nomination of Development Candidates; Designation of Designated Development Programs.

2.3.1 Nomination of Development Candidates; Delivery of Development Candidate Nomination Data Package. Based upon the Development Candidate Criteria and the results of Development activities with respect to a Research Program, Agios may nominate a Program Compound directed to the Program Target that is the subject of such Research Program as a Development Candidate, by providing written notification thereof to Celgene and the JRC. In addition, following [**], Celgene may propose to nominate a Program Compound directed to any Program Target as a Development Candidate, by providing written notification thereof to Agios and the JRC. Within [**] following any such proposed nomination, Agios shall use its reasonable efforts (without any requirement to perform any additional pre-clinical testing activity but solely based upon work then completed to date) to deliver to Celgene a Development Candidate Nomination Data Package; provided that, for any Program nominated by Celgene, Agios shall include only as much data or information as is available at the time of Celgene’s request for such Development Candidate Nomination Data Package.

2.3.2 Designation of Designated Development Programs; Payment of Designation Fee.

(a) Following nomination of a Program Compound as a Development Candidate and delivery of a Development Candidate Nomination Data Package by Agios pursuant to Section 2.3.1, the JRC shall determine, in accordance with Section 4.3.2(c), whether such Program Compound meets the Development Candidate Criteria as follows: (i) any such determination by the JRC must be unanimous; or (ii) in the event that the JRC does not unanimously agree that such Program Compound meets the Development Candidate Criteria, then (A) the Parties shall refer such dispute to a Scientific Panel appointed as provided in this Section 2.3.2(a) for determination of whether or not such Program Compound meets the Development Candidate Criteria; it being understood and agreed that, in connection with any review and determination by the Scientific Panel, the Scientific Panel will render a decision that is consistent with the Development Candidate Criteria; (B) within [**] following any such request for a Scientific Panel, each of Agios and Celgene shall nominate a Qualified Scientist to participate on the applicable Scientific Panel and, if the Parties are unable to agree upon a third Qualified Scientist for such Scientific Panel within [**] following any such request for a Scientific Panel, then the initial two Qualified Scientists shall select such third Qualified Scientist. Each Scientific Panel shall act as follows: (I) each Qualified Scientist (and the Scientific Panel as a whole) shall act as an expert and not as an arbitrator; (II) each decision of the Scientific Panel shall be by majority vote of the three Qualified Scientists; (III) the decision of the Scientific Panel is, in the absence of fraud or manifest error, final and binding on the Parties; (IV) the costs of the Scientific Panel shall be shared equally by Agios and Celgene; and (V) the Parties agree that only if such Scientific Panel determines that the Program Compound meets the Development Candidate Criteria, will such Program Compound shall be deemed a Development Candidate. Conversely, if such Scientific Panel determines that any such Program Compound does not meet the Development Candidate Criteria, then such Program Compound shall remain eligible for nomination as a Development Candidate during the Research Term. Following the proposed nomination of a Program Compound as a Development Candidate by

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Celgene pursuant to Section 2.3.1 and subject to Celgene’s written confirmation to Agios within [**] following receipt of the Development Candidate Nomination Data Package pursuant to Section 2.3.1 (or a Scientific Panel’s determination) that such Program Compound is a Development Candidate, such Program Compound shall be deemed to satisfy the Development Candidate Criteria (whether or not the Development Candidate Criteria have actually been satisfied). Agios shall use reasonable efforts to respond to requests from the JRC and Celgene for additional reasonable information and clarifications regarding content of the Development Candidate Nomination Data Package.

(b) Celgene shall be entitled, in its sole discretion, to designate any applicable Research Program as a Designated Development Program either: (i) in the case of a Program Compound nominated by Agios as a Development Candidate pursuant to Section 2.3.1, within [**] following delivery by Agios of a Development Candidate Nomination Data Package and determination by the JRC that the applicable Program Compound meets the Development Candidate Criteria, or (ii) in the case of a Program Compound nominated by Celgene as a Development Candidate pursuant to Section 2.3.1 following [**], at any time following such [**] until [**] following the receipt by Celgene of the applicable Development Candidate Nomination Data Package, either of which designations Celgene shall make by giving notice thereof to Agios prior to the end of the applicable [**] period and paying the Designation Fee as set forth in Section 6.2. During such [**] period, Agios shall use reasonable efforts to respond to requests from Celgene for additional reasonable information and clarifications regarding content of the Development Candidate Nomination Data Package. If Celgene makes such designation, Agios may thereafter conduct Pre-Exercise Phase I Development as to such Designated Development Program.

2.3.3 Disposition of Programs Not Designated as Designated Development Programs. If a Program Compound has been determined or deemed, as applicable, to meet the Development Candidate Criteria pursuant to Section 2.3.2(a), and Celgene does not designate the applicable Research Program as a Designated Development Program in accordance with Section 2.3.2(b) and therefore does not pay the Designation Fee, then such Research Program shall be dropped from the Collaboration and all rights thereto shall revert to Agios in accordance with Section 2.12.

2.4 Disposition of Programs After the End of the Research Term.

2.4.1 Designated Development Programs After the End of the Research Term. Agios’ conduct of Pre-Exercise Phase I Development as to Designated Development Programs that were designated prior to the end of the Research Term may continue following the expiration of the Research Term, and the Parties’ respective rights and obligations as to such Designated Development Programs shall continue in accordance with this Agreement following such Research Term expiration without any change on account of such expiration.

2.4.2 Programs that are Not Designated Development Programs as of the End of the Research Term. Upon expiration of the Research Term, Agios shall provide Celgene with an End-of-Research Term Program Data Package as to each Research Program (including, if applicable, the [**] Program or the [**] Program), excluding any Qualified Early Exercise I&I Program as to which the Parties have entered into a License Agreement, from which no

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Development Candidate has been nominated and designated. Celgene shall have a period of [**] following Celgene’s receipt of each End-of-Research Term Program Data Package from Agios pursuant to this Section 2.4.2 to elect, in its sole discretion, to designate up to three (3) such ongoing Research Programs as a Continuation Program (including, for the avoidance of doubt, the Deemed DC Program), which elections Celgene shall make by giving notice thereof to Agios prior to the end of such [**] period and paying the Designation Fees for each such Continuation Program as set forth in Section 6.2. During such [**] period, Agios shall use reasonable efforts to respond to requests from Celgene for additional reasonable information and clarifications regarding content in any End-of-Research Term Program Data Package, provided that, unless otherwise agreed by Agios, such [**] period shall not be extended to facilitate such responses. If Celgene makes any such election, Agios may elect in its sole discretion to conduct Development activities with the goal of identifying and nominating a Program Compound in such Continuation Program as a Development Candidate and thereafter may conduct Pre-Exercise Phase I Development as to such Continuation Program. The Parties’ respective rights and obligations as to such Continuation Programs shall otherwise be the same as for Designated Development Programs (that were designated as Designated Development Programs prior to the end of the Research Term) and shall continue in accordance with this Agreement following the Research Term expiration.

2.4.3 Treatment of Continuation Programs. If Celgene designates one or more Continuation Programs (including, if applicable, the [**] Program or the [**] Program) in accordance with Section 2.4.2, the Continuation Program that, in Celgene’s reasonable determination, has progressed the furthest shall constitute the “Deemed DC Program.” Each Continuation Program (including the Deemed DC Program) shall be conducted without adjustment to the terms contemplated by Section 2.4.2 (i.e., any Pre-Exercise Phase I Development activities for such Continuation Program that may be conducted by Agios shall be at Agios’ sole discretion and expense).

2.4.4 Disposition of Programs Not Designated as Continuation Programs. Any Research Program that Celgene does not designate as a Continuation Program in accordance with Section 2.4.2 shall be dropped from the Collaboration and all rights thereto shall revert to Agios in accordance with Section 2.12.

2.5 Completion of Pre-Exercise Phase I Development. Upon Agios’ completion of Pre-Exercise Phase I Development as to any Designated Development Program or Continuation Program, or earlier upon Celgene’s written request, Agios shall provide Celgene with an Option Data Package for such Program (in any case within [**] following such completion of Pre-Exercise Phase I Development as to any Designated Development Program or Continuation Program or Celgene’s request, as applicable). During the period between Celgene’s receipt of such Option Data Package and the applicable Option Data Package Verification Date, Agios shall use reasonable efforts to respond to requests from Celgene for additional reasonable information and clarifications regarding content of the Option Data Package.

2.6 Regulatory Affairs. Agios shall be responsible for and shall control all regulatory matters relating to each Pre-Exercise Program. For all regulatory matters concerning any Pre-Exercise Program, until such time that Celgene either exercises its Option and enters into a Development & Commercialization Agreement or such Pre-Exercise Program reverts to Agios in accordance with Section 2.12, Agios shall consult with Celgene with respect to filing strategy and document preparation, and shall reasonably consider all timely comments made by Celgene with respect thereto.

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2.7 Reports; Results; Testing by the Parties. Each Party shall maintain complete, current and accurate records of all Development activities conducted by it under the Collaboration, and all data and other information resulting from such activities. Such records shall fully and properly reflect all work done and results achieved in the performance of the Development activities in good scientific manner appropriate for regulatory and patent purposes. Each Party shall document all non-clinical studies and clinical trials for Programs in formal written study records according to applicable Laws, including national and international guidelines such as ICH, GCP, GLP and GMP. Each Party shall have the right to review and copy such records maintained by the other Party at reasonable times, as reasonably requested by a Party. At each meeting of the JRC or the JDC held pursuant to Section 4.8.2, each Party shall provide the other Party a written progress report summary (which may consist solely of slides) on the status of its activities under each Program during the Research Term, including summaries of data associated with such Party’s activities, it being understood that Celgene may reasonably request additional information regarding any such written progress report summary.

2.8 No Representation. Neither Party makes any representation, warranty or guarantee that the Collaboration will be successful, or that any other particular results will be achieved with respect to the Collaboration, any Program, any Program Target, any Program Compound, any Development Candidate or any Program Product hereunder.

2.9 Subcontracting. Subject to the terms of this Agreement or any Development & Commercialization Agreement, as applicable, each Party shall have the right to engage Affiliates or Third Party subcontractors to perform certain of its obligations under this Agreement or any Development & Commercialization Agreement, as applicable. Any such Affiliate or subcontractor shall meet the qualifications typically required by such Party for the performance of work similar in scope and complexity to the subcontracted activity and perform such work consistent with the terms of this Agreement or any Development & Commercialization Agreement, as applicable; provided, however, that any Party engaging an Affiliate or subcontractor hereunder shall remain fully responsible and obligated for such activities. Unless otherwise agreed by the Parties, each Party will obligate each Third Party subcontractor to agree in writing to assign to such Party ownership of, or grant to such Party an exclusive, royalty-free, worldwide, perpetual and irrevocable license (with the right to grant sublicenses) to, any inventions arising under its agreement with such Third Party to the extent related to Development, Manufacture or Commercialization with respect to Program Compounds, as applicable; and such Party shall structure such assignment or exclusive license so as to enable such Party to sublicense such Third Party inventions to the other Party pursuant to the applicable provisions of this Agreement and of any applicable Development & Commercialization Agreement (including permitting such other Party to grant further sublicenses).

2.10 Academic Collaborators. If either Party collaborates with an academic institution and/or one or more individuals at an academic institution to perform research on Program Targets or Program Compounds, such Party shall be required to obligate such academic collaborator to agree in writing to grant the same rights specified in Section 2.9 with respect to

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ownership or licenses to inventions; it being understood and agreed that, [**], which sublicensing rights must permit sublicensing to the other Party pursuant to the applicable provisions of this Agreement and of any applicable Development & Commercialization Agreement (including permitting such other Party to grant further sublicenses).

2.11 Material Transfer.

2.11.1 Transfer. On a Program-by-Program basis, during the Option Term, either Party (the “Transferring Party”) shall transfer, if such Party agrees in writing to make such transfer (such agreement not to be unreasonably withheld) upon reasonable request by the other Party (the “Material Receiving Party”), certain tangible materials (the “Materials”) for use by the Material Receiving Party in furtherance of its rights and the conduct of its obligations under this Agreement, as mutually agreed by the Parties and set forth in an appropriate material transfer agreement (the “Purpose”). The Parties agree that the exchanged Materials shall be used in compliance with applicable Law and the terms and conditions of this Agreement, and shall not be reverse engineered or chemically analyzed, except as required for verification purposes (if needed).

2.11.2 License; Ownership. At the time the Transferring Party provides Materials to the Material Receiving Party as provided herein and to the extent not separately licensed under this Agreement, the Transferring Party hereby grants to the Material Receiving Party a non-exclusive license under the Patents and Know-How Controlled by the Transferring Party to use such Materials solely for the Purpose, and such license, upon termination of this Agreement (subject to ARTICLE XI), completion of the Purpose, or discontinuation of the use of such Materials (whichever occurs first), shall automatically terminate. Except as otherwise provided under this Agreement, all such Materials delivered by the Transferring Party to the Material Receiving Party shall remain the sole property of the Transferring Party, shall only be used by the Material Receiving Party in furtherance of the Purpose, and shall be returned to the Transferring Party or destroyed, in the Transferring Party’s sole discretion, upon the termination of this Agreement (subject to ARTICLE XI), the expiration of the Option Exercise Window with respect to any Program to which such Materials solely relate (unless the Option is exercised for the Program for which such transfer occurred), or upon the discontinuation of the use of such Materials (whichever occurs first). The Material Receiving Party shall not permit the Materials to be used by or delivered to or for the benefit of any Third Party without the prior written consent of the Transferring Party unless such Third Party is a Third Party subcontractor as set forth in Section 2.9.

2.11.3 No Warranties; Liability. THE MATERIALS SUPPLIED BY THE TRANSFERRING PARTY UNDER THIS SECTION 2.11 ARE SUPPLIED “AS IS” AND, EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE TRANSFERRING PARTY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE MATERIALS OR USE THEREOF DO NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER PROPRIETARY RIGHTS OF A THIRD PARTY. The Material Receiving Party assumes all liability for Damages that may arise from its use, storage or disposal of the Materials. Except as otherwise set forth in this Agreement, the Transferring Party shall

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not be liable to the Material Receiving Party for any loss, claim or demand made by the Material Receiving Party, or made against the Material Receiving Party by any Third Party, due to or arising from the use of the Materials, except to the extent such loss, claim or demand is caused by the gross negligence or willful misconduct of the Transferring Party.

2.12 Reversion of Rights.

2.12.1 Programs. If Section 2.2.1, Section 2.3.3, Section 2.4.4, Section 3.1.3 or Section 11.5.1(a) specifies that rights to a Program are to be dropped from the Collaboration or if Celgene does not exercise its Option with respect to any Programs within the applicable Option Exercise Window for such Program, then (a) all rights granted by Agios to Celgene with respect to such Program, if any, shall revert to Agios, and (b) subject to ARTICLE VIII, Celgene shall return to Agios, or destroy, at Agios’ option, all Confidential Information and/or Materials provided by Agios to Celgene in relation to such Program; provided, however, that any Confidential Information and/or Materials that also relate to a non-terminated Program may be retained by Celgene.

2.12.2 Reversion License. Effective upon any of the events set forth in Section 2.12.1 with respect to a Program, Celgene hereby grants to Agios [**] with the right to grant sublicenses as set forth in Section 5.1.4, under Celgene’s rights in Celgene Collaboration Intellectual Property and Joint Collaboration IP, to Develop, Manufacture and/or Commercialize Program Compounds or Program Products under such Program; provided that, for this purpose, “Celgene Collaboration Intellectual Property” means Celgene Collaboration Intellectual Property only to the extent that it is actually used in such Program prior to the applicable reversion set forth in this Section 2.12; provided further that the foregoing license under this Section 2.12.2 shall be [**] with respect to the applicable Program to the extent of claims within the Patents included in the Celgene Collaboration Intellectual Property and Joint Collaboration IP that Cover a composition of matter of any such Program Compound or Program Product. Agios shall not owe royalties or milestones with respect to any license in this Section 2.12.2, but Agios shall be solely responsible for any payments owed by Celgene to any Third Party licensors of Celgene Collaboration Intellectual Property or Joint Collaboration IP, and shall be responsible for complying with the terms of any license agreements with such third Party licensors, in either case, directly related to Agios’ exercise of such licenses

2.12.3 Optioned Programs. For the avoidance of doubt, none of the reversion events described in this Section 2.12 shall affect Celgene’s rights with respect to any other Program for which Celgene retains Option rights or has delivered an Option Exercise Notice pursuant to Section 3.1.2(a).

ARTICLE III

OPTION EXERCISE; DEVELOPMENT & COMMERCIALIZATION AGREEMENTS

3.1 Option Grant and Exercise.

3.1.1 Option Grant by Agios.

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(a) Subject to the terms and conditions of this Agreement on a Designated Development Program-by-Designated Development Program and Continuation Program-by-Continuation Program basis, Agios hereby grants to Celgene, with respect to each Designated Development Program and Continuation Program, an exclusive option (each, an “Option”), exercisable at any time during the period commencing on the date that a Development Candidate for such Designated Development Program is designated pursuant to the terms and conditions of this Agreement or the date on which a Continuation Program is designated pursuant to the terms and conditions of this Agreement, as applicable, and ending [**] following the applicable Option Data Package Verification Date (each such period for each Designated Development Program and Continuation Program, as applicable, the “Option Exercise Window”) to enter into a Development & Commercialization Agreement with respect to such Designated Development Program or Continuation Program, pursuant to this Section 3.1.

(b) In addition, subject to the terms and conditions of this Agreement on an Qualified Early Exercise I&I Program-by-Qualified Early Exercise I&I Program basis, Celgene may exercise an Option with respect to up to [**] Qualified Early Exercise I&I Programs at any time during the Research Term that such Qualified Early Exercise I&I Program remains a Qualified Early Exercise I&I Program (the “Early Option Exercise Window”), to enter into a License Agreement with respect to such Qualified Early Exercise I&I Program.

3.1.2 Option Exercise.

(a) Celgene shall have the right, but not the obligation, to exercise the Option for a given Designated Development Program or Continuation Program by delivering an Option Exercise Notice to Agios within the applicable Option Exercise Window. Celgene shall have the right, but not the obligation, to exercise the Option for a given Qualified Early Exercise I&I Program by delivering an Option Exercise Notice to Agios within the Early Option Exercise Window. Upon such exercise, the applicable Qualified Early Exercise I&I Program, Designated Development Program or Continuation Program shall become a “Post-Exercise Program”. Within [**] following each Option Exercise Notice delivery, Celgene (or an Affiliate designated by Celgene) and Agios and each Affiliate of Agios that holds Agios Intellectual Property relating to the applicable Qualified Early Exercise I&I Program, Designated Development Program or Continuation Program will enter into (i) a Co-Development and Co-Commercialization Agreement with respect to any such Post-Exercise Program that is an IO Program, [**] Program or [**] Program, or (ii) a License Agreement with respect to any such Post-Exercise Program that is an I&I Program; and in either case will update the exhibits and schedules thereto, as applicable, including to identify the Program Compound(s) and Program Target that are the subject of such Development & Commercialization Agreement. Following the applicable Implementation Date for Development & Commercialization Agreement, Celgene shall pay the applicable fees set forth in such Development & Commercialization Agreement in accordance therewith.

(b) At any time during the Option Exercise Window, with respect to any Designated Development Program or Continuation Program that is an IO Program, other than the [**] Program and/or [**] Program, Celgene shall have the right to designate one of such IO Programs as the Shared 65/35 Program. Celgene shall indicate in the applicable Option

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Exercise Notice whether it is designating any such IO Program as the Shared 65/35 Program. For clarity: (i) if Celgene exercises its Option with respect to the [**] Program or the [**] Program, such Program shall be a Shared 50/50 Program subject to the provisions set forth in Section 3.1.2(c) below, and (ii) for so long as Celgene has not previously designated an IO Program (other than the [**] Program and/or [**] Program) as the Shared 65/35 Program, it shall always be entitled to designate an IO Program as the Shared 65/35 Program at the time of the exercise of the Option for such IO Program (and such designated Shared 65/35 Program shall not be considered as a “Shared 50/50 Program” for any purpose under Section 3.1.2(c) below, including with regard to the Alternating Mechanism).

(c) Subject to Celgene’s right to select the Shared 65/35 Program pursuant to Section 3.1.2(b), at any time during the Option Exercise Window, with respect to any Designated Development Program or Continuation Program that is an IO Program (including for purposes of this Section 3.1.2(c) the [**] Program and [**] Program), Agios shall have the option of designating the first Shared 50/50 Program as an Agios Lead Shared Program on or prior to the execution of the applicable Co-Commercialization and Co-Development Agreement. If Agios does not elect to designate the first Shared 50/50 Program as an Agios Lead Shared Program, then such Shared 50/50 Program shall be a Celgene Lead Shared Program and the second Shared 50/50 Program shall be an Agios Lead Shared Program. Thereafter, the designation of any further Shared 50/50 Programs shall alternate between the Parties, i.e., if the prior designated Shared 50/50 Program was an Agios Lead Shared Program, the next designated Shared 50/50 Program would be a Celgene Lead Shared Program, and vice versa, with respect to each subsequently designated Shared 50/50 Program (the “Alternating Mechanism”). By way of example, if the first Shared 50/50 Program is designated an Agios Lead Shared Program, and the second IO Program for which Celgene exercises its Option is designated the Shared 65/35 Program pursuant to Section 3.1.2(b), then the third IO Program for which Celgene exercises an Option as a Shared 50/50 Program shall be automatically designated a Celgene Lead Shared Program.

3.1.3 Expiration of Option Exercise Windows. If Celgene does not exercise an Option during the applicable Option Exercise Window, then the corresponding Designated Development Program or Continuation Program shall be dropped from the Collaboration in accordance with Section 2.12 and shall no longer be subject to Celgene’s rights under this Agreement, including ARTICLE V and all rights thereto shall revert to Agios in accordance with Section 2.12.

3.2 Government Approvals.

3.2.1 Efforts. Each of Agios and Celgene will use its commercially reasonable good faith efforts to eliminate any concern on the part of any Governmental Authority regarding the legality of any proposed Development & Commercialization Agreement including, if required by Governmental Authorities, promptly taking all steps to remove any and all impediments to consummation of the transactions contemplated by the Development & Commercialization Agreements, including obtaining government antitrust clearance, cooperating in good faith with any Governmental Authority investigation, promptly producing any documents and information and providing witness testimony if requested by a Governmental Authority. Notwithstanding anything to the contrary in this Agreement and the Development & Commercialization Agreements, this Section 3.2 and the term “commercially reasonable good faith efforts” do not require that either Party (a) [**], (b) [**], or (c) [**].

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3.2.2 HSR/Antitrust Filings. Each of Agios and Celgene will, within [**] after the execution of the relevant Development & Commercialization Agreement (or such later time as may be agreed to in writing by the Parties) file with the U.S. Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ”) any HSR/Antitrust Filing required of it under the HSR Act and, as soon as practicable, file with the appropriate Governmental Authority any other HSR/Antitrust Filing required of it under any other Antitrust Law as determined in the reasonable opinion of either Party with respect to the transactions contemplated by the relevant Development & Commercialization Agreement. The Parties shall cooperate with one another to the extent necessary in the preparation of any such HSR/Antitrust Filing. Each Party shall be responsible for its own costs, expenses and filing fees associated with any HSR/Antitrust Filing; provided, however, that the Parties shall [**]. In the event that the Parties make an HSR/Antitrust Filing under this Section 3.2, the relevant Development & Commercialization Agreement shall terminate (a) at the election of either Party, immediately upon notice to the other Party, in the event that the FTC, DOJ or other Governmental Authority obtains a preliminary injunction or final order under Antitrust Law enjoining the transactions contemplated by such Development & Commercialization Agreement, or (b) at the election of either Party, immediately upon notice to the other Party, in the event that the Antitrust Clearance Date shall not have occurred on or prior to [**] after the effective date of the last HSR/Antitrust Filing submitted to a Governmental Authority in relation to the relevant Development & Commercialization Agreement. Notwithstanding anything to the contrary contained herein, except for the terms and conditions of this Section 3.2, none of the terms and conditions contained in the relevant Development & Commercialization Agreement shall be effective until the “Implementation Date,” which is agreed and understood to mean the later of (i) the execution date of the relevant Development & Commercialization Agreement, (ii) if a determination is made pursuant to this Section 3.2 that an HSR/Antitrust Filing is not required to be made under any Antitrust Law for the relevant Development & Commercialization Agreement, the date of such determination, or (iii) if a determination is made pursuant to this Section 3.2 that an HSR/Antitrust Filing is required to be made under any Antitrust Law for the relevant Development & Commercialization Agreement, the Antitrust Clearance Date. As used herein: (x) “Antitrust Clearance Date” means the earliest date on which the Parties have actual knowledge that all applicable waiting periods under the HSR Act and any comparable waiting periods as required under any other Antitrust Law, in each case with respect to the transactions contemplated by the relevant Development & Commercialization Agreement have expired or have been terminated; and (y) “HSR/Antitrust Filing” means (i) a filing by Agios and Celgene with the FTC and the DOJ of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act), together with all required documentary attachments thereto or (ii) any comparable filing by Agios or Celgene required under any other Antitrust Law, in each case ((i) and (ii)) with respect to the transactions contemplated by the Development & Commercialization Agreements.

3.2.3 Information Exchange. Each of Agios and Celgene will, in connection with any HSR/Antitrust Filing, (a) reasonably cooperate with each other in connection with any communication, filing or submission and in connection with any investigation or other inquiry,

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including any proceeding initiated by a private party; (b) keep the other Party and/or its counsel informed of any communication received by such Party from, or given by such Party to, the FTC, the DOJ or any other U.S. or other Governmental Authority and of any communication received or given in connection with any proceeding by a private party, in each case regarding the transactions contemplated by any Development & Commercialization Agreement; (c) consult with each other in advance of any meeting or conference with the FTC, the DOJ or any other Governmental Authority or, in connection with any proceeding by a private party, with any other Person, and to the extent permitted by the FTC, the DOJ or such other Governmental Authority or other Person, give the Parties and/or their counsel the opportunity to attend and participate in such meetings and conferences; and (d) to the extent practicable, permit the other Party and/or its counsel to review in advance any submission, filing or communication (and documents submitted therewith) intended to be given by it to the FTC, the DOJ or any other Governmental Authority; provided that materials may be redacted to remove references concerning the [**]. Agios and Celgene, as each deems advisable and necessary, may reasonably designate any competitively sensitive material to be provided to the other under this Section 3.2.3 as “Antitrust Counsel Only Material.” Such materials and the information contained therein shall be given only to the outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials (Agios or Celgene, as the case may be) or its legal counsel.

3.2.4 Assistance Unrelated to Antitrust Law. Subject to this Section 3.2, Agios and Celgene shall cooperate and use respectively all reasonable efforts to make all other registrations, filings and applications, to give all notices and to obtain as soon as practicable all governmental or other consents, transfers, approvals, orders, qualifications, authorizations, permits and waivers, if any, and to do all other thing necessary or desirable for the consummation of the transactions as contemplated hereby.

3.2.5 No Further Obligations. If any Development & Commercialization Agreement is terminated pursuant to this Section 3.2, then, notwithstanding any provision in this Agreement to the contrary, neither Party shall have any further obligation to the other Party with respect to the subject matter of the relevant Development & Commercialization Agreement; provided that, prior to termination of a Development & Commercialization Agreement pursuant to this Section 3.2, Celgene shall instead be permitted to [**], if required to comply with any Antitrust Law; provided further that, the right to [**] set forth in the prior proviso shall not apply if a breach by Celgene of its obligations under Section 5.2 is a material cause of the failure to obtain clearance under Antitrust Laws and, in such event, rights to such Program shall revert to Agios in accordance with the terms of the applicable Development & Commercialization Agreement.

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ARTICLE IV

GOVERNANCE

4.1 General.

4.1.1 Governance Committees. The Parties shall establish (a) a Joint Steering Committee (“JSC”) to oversee and coordinate the overall conduct of all Programs hereunder; (b) a Joint Research Committee (“JRC”) to oversee and coordinate discovery, research and pre-clinical Development activities with respect to each Research Program until nomination of a Development Candidate for such Research Program; (c) a Joint Development Committee (“JDC”) for each Program as to which a Development Candidate has been nominated and designated and for which Celgene retains an Option; (d) a Joint Commercialization Committee (“JCC”) to oversee Commercialization activities under a Development & Commercialization Agreement; and (e) a Joint Patent Committee (“JPC”) to oversee Patent Prosecution and enforcement (the JSC, the JRC, the JDC, the JCC and the JPC shall each be referred to as a “Committee”). Each Committee shall have decision-making authority with respect to the matters within its purview to the extent expressly and as more specifically provided herein; it being understood and agreed that with respect to any Program that is subject to an executed License Agreement, no Committee shall have any review or decision-making authority. For the avoidance of doubt, from and after the Effective Date, no “Committee” or other working group established under the 2010 Agreement shall have the authority to address any matters involving this Collaboration.

4.1.2 From time to time, each Committee may establish subcommittees to oversee particular projects or activities, as it deems necessary or advisable (each, a “Subcommittee”). Each Subcommittee shall consist of such number of members as the applicable Committee determines is appropriate from time to time. Such members shall be individuals with expertise and responsibilities in the relevant areas such as [**], as applicable to the stage of the project or activity. Such Subcommittees shall operate under the same principles as are set forth in this ARTICLE IV for the Committee forming such Subcommittee.

4.1.3 Execution of Co-Development and Co-Commercialization Agreement. On a Program-by-Program basis, upon execution of the applicable Co-Development and Co-Commercialization Agreement for such Program, such Program and matters related thereto shall continue to be within the purview of the applicable Committee, in accordance with and pursuant to the terms of the applicable Co-Development and Co-Commercialization Agreement.

4.1.4 Certain Interactions with and Effects on the 2010 Agreement. Upon and after the Effective Date, notwithstanding anything to the contrary in the 2010 Agreement (with each quoted term below having the meaning given in the 2010 Agreement):

(a) All activities regarding Development, Manufacturing and Commercialization of Program Compounds and Program Products for the [**] Program or the [**] Program under the 2010 Agreement and all future such activities shall be conducted solely under this Agreement.

(b) None of the Parties’ activities performed in accordance with this Agreement (including those activities specifically permitted upon and after termination) shall be deemed a violation of, nor shall they be subject to, the 2010 Agreement.

(c) No Program Compound or Program Product for the [**] Program or the [**] Program is or can be (i) included as an “Agreement Compound” or in any of the classes of compounds comprising “Agreement Compounds”, (ii) part of the “Compound List,” (iii) included in any of the “Picks”, or (iv) part of an “Agios Reverted Program,” or “Celgene Reverted Program”, each of (i) – (iv) under the 2010 Agreement.

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(d) No payments, including any “IND Amount” or “Phase I Amount”, any milestones or any royalties, will be due under the 2010 Agreement with respect to any Program Compounds and Program Products under this Agreement (including the [**] Program or the [**] Program).

(e) No decision of any “Committee” or working group under the 2010 Agreement shall have any binding effect on any Committee or working group under this Agreement, and no decision of any Committee or working group under this Agreement shall have any binding effect on any “Committee” or working group under the 2010 Agreement notwithstanding that the members of any such committees may contain some or all of the same individual representatives for each Party.

(f) All “Confidential Information” disclosed under the 2010 Agreement that solely relates to the [**] Program or the [**] Program shall be deemed to be Confidential Information disclosed under this Agreement and not the 2010 Agreement. All “Confidential Information” disclosed under the 2010 Agreement that relates to, but does not solely relate to, the [**] Program or the [**] Program shall be deemed “Confidential Information” disclosed under the 2010 Agreement and also Confidential Information disclosed under this Agreement; provided, however, that any disclosure of such information that is permitted under the 2010 Agreement shall not be deemed a breach of this Agreement and any disclosure of such information that is permitted under this Agreement shall not be deemed a breach of the 2010 Agreement.

4.2 Joint Steering Committee.

4.2.1 Establishment. Within [**] following the Effective Date, Agios and Celgene shall establish the JSC. The JSC shall have oversight over each Program, subject to Sections 4.10 and 4.11.

4.2.2 Duties. The JSC shall:

(a) manage the strategic direction of the Collaboration;

(b) oversee implementation of the Collaboration in accordance with this Agreement;

(c) review and monitor progress of the Collaboration and serve as a forum for exchanging information and facilitating discussions regarding the conduct of the Collaboration;

(d) oversee and coordinate the conduct of all Programs and related matters within the responsibilities of the Committees hereunder;

(e) discuss and determine appropriate measures to take in view of Third Party rights;

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(f) provide strategic guidance, and coordinate efforts between the Parties, with respect to any Publications and, by mutual agreement, approve requests for Publication, from either Party, according to the Publication Guidelines and Section 8.4 hereof;

(g) serve as a forum for dispute resolution in accordance with Section 4.10 with respect to matters that are not resolved at the JRC, JDC, JCC or JPC; and

(h) perform such other duties as are specifically assigned to the JSC under this Agreement or any Development & Commercialization Agreement.

4.3 Joint Research Committee.

4.3.1 Establishment. Within [**] following the Effective Date, Agios and Celgene shall establish the JRC. The JRC shall have oversight over each Research Program until a Development Candidate has been nominated and designated for such Program, subject to Sections 4.10 and 4.11.

4.3.2 Duties. The JRC shall:

(a) approve the designation of Research Programs in accordance with Section 2.2.1;

(b) oversee, review and provide strategic guidance to the Parties with respect to the conduct of each Research Program, including the prioritization of Research Programs;

(c) review the basis [**] that a Program Compound has met the criteria for a Development Candidate and determine whether such Program Compound has met such criteria;

(d) [**];

(e) in conjunction with the JDC, discuss additional Indications for Development of Program Compounds or Development Candidates of Designated Development Programs or Continuation Programs;

(f) oversee the initial development of any biomarkers;

(g) oversee and coordinate the Parties’ activities with respect to the IND-enabling activities and Manufacture of pre-clinical and clinical supply of Program Compounds and Program Products (to the extent the JDC has not yet been formed);

(h) provide a forum for the Parties (i) to discuss the objectives of each Research Program; and (ii) to exchange and review scientific information and data relating to the activities being conducted under each Research Program;

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(i) provide a forum for the Parties to identify and discuss which Research Programs satisfy the criteria for Qualified Early Exercise I&I Programs and are eligible for early Option exercise by Celgene pursuant to Section 3.1.1(b);

(j) discuss and attempt to resolve any disputes in the JRC; and

(k) perform such other duties as are specifically assigned to the JRC under this Agreement.

4.3.3 Dissolution. The JRC shall be dissolved and its activities and authority terminated upon the end of the Option Term.

4.4 Joint Development Committee.

4.4.1 Establishment. Within [**] following Celgene’s first designation of a Designated Development Program pursuant to Section 2.3.2(b) or of a Continuation Program pursuant to Section 2.4.2, Agios and Celgene shall establish the JDC. The JDC shall have oversight over Development activities with respect to each Designated Development Program or Continuation Program and as to which Celgene retains an Option hereunder or that has become a Shared Program.

4.4.2 Duties Prior to Option Exercise by Celgene. The JDC shall:

(a) Review and approve the applicable Development plans for each Designated Development Program and Continuation Program and any proposed updates or amendments to such Development plans, and propose revisions to each of such Development plans as needed;

(b) review and approve the content of any IND for a Program Product and oversee, review and coordinate the studies required for the preparation of the CMC section of an IND for filing with Regulatory Authorities for the Program Products, including studies relating to analytical methods and purity analysis;

(c) provide a forum for the Parties to share information with respect to the Development of Program Compounds and Program Products, including reviewing and commenting on updates on such Development;

(d) provide a forum for the Parties to discuss whether to conduct additional Development activities for a Related Compound (other than the designated Development Candidate for a Designated Development Program or a Program Compound for a Continuation Program) for a Designated Development Program or Continuation Program;

(e) [**];

(f) [**];

(g) oversee, review and coordinate process research and development activities (including Manufacturing and formulation development activities);

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(h) oversee and coordinate the Parties’ activities with respect to the Manufacture of pre-clinical and clinical supply of Program Compounds and Program Products, including discussion, review and implementation of any Supply Plan(s) (as defined in Exhibit A);

(i) discuss and attempt to resolve any disputes in the JDC; and

(j) perform such other duties as are specifically assigned to the JDC under this Agreement or a Development & Commercialization Agreement.

4.4.3 Duties Post Option Exercise by Celgene. The JDC shall, solely with respect to any Shared Program under an executed Co-Development and Co-Commercialization Agreement:

(a) review and recommend to the JSC approval of the initial Development Plan (as provided in the Co-Development and Co-Commercialization Agreement) and any proposed updates or amendments to the Development Plan (and applicable Development Budget) (each as defined in Appendix A) as needed;

(b) oversee, review, coordinate and provide strategic guidance to the Parties on the Development of the Compounds and Licensed Products (each as defined in Appendix A), including assigning activities to be performed by each Party, subject to the provisions of the Co-Development and Co-Commercialization Agreement;

(c) review and coordinate such committees’ activities with respect to the Development of the Compounds and Licensed Products with the Parties activities under the Co-Development and Co-Commercialization Agreement;

(d) subject to and within the parameters of each Development Plan (i) oversee the implementation of the Development Plan (including evaluation of clinical trial protocols and review of the conduct of clinical trials conducted pursuant to the Development Plan); and (ii) oversee and approve the overall strategy and positioning of all material submissions and filings with the applicable Regulatory Authorities;

(e) oversee the Development of any Companion Diagnostics, including the Development of any biomarkers;

(f) oversee, review and coordinate (in conjunction with the JCC) formulation and Manufacturing development studies, together with associated regulatory activities;

(g) oversee, review and coordinate the Parties’ activities with respect to Manufacturing of Compounds and Licensed Product for Development purposes, including, in conjunction with the JCC, pre-clinical and clinical supply;

(h) develop and approve a publication plan for any Publications made prior to the First Commercial Sale (as defined in the Co-Development and Co-Commercialization Agreement) of a Shared Product;

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(i) discuss and attempt to resolve any disputes in the JDC; and

(j) perform such other duties as are specifically assigned to the JDC under the Co-Development & Co-Commercialization Agreement.

4.5 Joint Commercialization Committee.

No later than the earlier of (a) the date upon which the Parties commence the first Phase III Study, or (b) the date upon which the Parties commence the first Pivotal Clinical Trial, or within [**] after request by either Party if requested by either Party earlier, the Parties shall establish the JCC. The Parties intend that the JCC shall have the responsibility for overseeing the Commercialization of Shared Products under the Collaboration pursuant to the terms of each Co-Development and Co-Commercialization Agreement.

4.5.1 Meetings. The first scheduled meeting of the JCC shall be held no later than [**] after establishment of the JCC unless otherwise agreed by the Parties. After the first scheduled meeting of the JCC until the JCC is disbanded, the JCC shall meet in person or telephonically at least [**], as further provided in Section 4.8. The JCC shall disband upon the expiration or termination of all Co-Development and Co-Commercialization Agreements. Each Party will bear all expenses it incurs in regard to participating in all meetings of the JCC, including all travel and living expenses.

4.5.2 Duties. The JCC shall:

(a) approve the initial Commercialization Plan (as defined in Appendix A) for each Shared Product and, each year thereafter, shall review and approve the Commercialization Plan for the then-current Calendar Year and the next succeeding Calendar Year;

(b) oversee implementation of the Commercialization Plan;

(c) review and coordinate the Commercialization activities of Celgene and Agios with respect to Shared Products, including pre-launch and post-launch activities in the United States;

(d) review and comment on approaches and plans proposed by the applicable Lead Party in the relevant portion of the Territory (each as defined in Appendix A) [**];

(e) discuss any branding and/or co-branding matters;

(f) establish target numbers regarding reach and frequency of sales performance;

(g) discuss, review and implement any Supply Plan(s) (as defined in Appendix A);

(h) discuss and attempt to resolve any disputes in the JCC; and

(i) such other responsibilities as may be set forth in a Co-Development and Co-Commercialization Agreement or mutually agreed by the Parties from time to time. For

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purposes of clarity, the JCC shall not have any authority beyond the specific matters set forth in this Section 4.5. In any case where a matter within the JCC’s authority arises, the JCC shall convene a meeting and consider such matter as soon as reasonably practicable, but in no event later than [**] after the matter is first brought to the JCC’s attention (or, if earlier, at the next regularly scheduled JCC meeting).

4.6 Joint Patent Committee.

4.6.1 Establishment. The initial members of the JPC for each Party will be determined by each Party, respectively, within [**] after the Effective Date. The Parties intend that the JPC shall have the responsibility for sharing information and coordinating Patent Prosecution matters involving Agios Patents, Celgene Patents, Patents included in the Celgene Collaboration Intellectual Property and Joint Collaboration Patents.

4.6.2 Duties. The JPC shall:

(a) discuss the current status of all Agios Patents, Celgene Patents, Patents included in the Celgene Collaboration Intellectual Property and Joint Collaboration Patents;

(b) discuss filing and claiming strategies involving Agios Patents, Celgene Patents, Patents included in the Celgene Collaboration Intellectual Property and Joint Collaboration Patents both existing as of the Effective Date as well as any new applications filed after the Effective Date;

(c) coordinate the timing and conduct of transfer of the Parties’ responsibilities under a Co-Development and Co-Commercialization Agreement with respect to Prosecution;

(d) coordinate the Parties’ respective activities in preparation for potential litigation involving the assertion of the Agios Patents, Celgene Patents, Patents included in the Celgene Collaboration Intellectual Property and Joint Collaboration Patents;

(e) discuss and attempt to resolve any disputes in the JPC; and

(f) perform such other duties as are specifically assigned to the JPC under this Agreement or any Co-Development and Co-Commercialization Agreement.

4.7 Alliance Managers. Each Party shall appoint one designated representative to serve as an alliance manager (“Alliance Manager”) with responsibility for being the primary point of contact between the Parties with respect to the Collaboration. The Alliance Managers shall attend JSC, JRC, JDC, JCC and JPC meetings, as necessary, as non-voting observers. Nothing herein shall prohibit a Party from appointing its Alliance Manager as a member of one or more Committees.

4.8 General Committee Membership and Procedures.

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4.8.1 Committee Membership. Each Committee shall each be composed of three (3) representatives from each of Celgene and Agios (provided that the JPC shall be composed of two (2) representatives from each of Celgene and Agios), each of which representatives shall be of the seniority and experience appropriate for service on the applicable Committee in light of the functions, responsibilities and authority of such Committee and the status of Development of the Program Products being pursued hereunder from time to time. Each Party may replace any of its representatives on any Committee at any time with prior written notice to the other Party; provided that such replacement meets this standard. Each Committee shall appoint a chairperson from among its members, with the chairperson for the JRC and JDC being a representative from [**], and the chairperson for the JSC being a representative from [**]. The JSC shall appoint the chairpersons for the JCC and the JPC. Within [**] following each Committee meeting, the chairperson of each Committee shall circulate to all Committee members a draft of the minutes of such meeting. The Committee shall then approve, by mutual agreement, such minutes within [**] following circulation.

4.8.2 Committee Meetings.

(a) The JSC and JRC shall hold an initial joint meeting within [**] after the Effective Date or as otherwise agreed by the Parties. The JDC shall meet at the time the JDC is formed in accordance with Section 4.4.1. Thereafter, each Committee shall meet at least [**], unless the respective Committee members otherwise agree. All Committee meetings shall be conducted in person or, for [**] of such meetings each year, by teleconference, unless otherwise determined by the applicable Committee.

(b) Unless otherwise agreed by the Parties, all in-person meetings for each Committee shall be held on an alternating basis between Agios’ facilities in Cambridge, Massachusetts (or such future location as Agios’ facilities may move to) and Celgene’s facilities in Summit, New Jersey, Seattle, Washington, San Francisco, California or San Diego, California, as determined by Celgene (or such future location as Celgene’s facilities may move to). A reasonable number of other representatives of a Party may attend any Committee meeting as non-voting observers; provided that such additional representatives are under obligations of confidentiality and non-use applicable to the Confidential Information of the other Party that are at least as stringent as those set forth in ARTICLE VIII; and provided further that the Parties, reasonably in advance of the applicable Committee meeting, approve the list of non-voting observers to attend such meeting. Each Party shall be responsible for all of its own personnel and travel costs and expenses relating to participation in Committee meetings.

4.9 Responsibilities under Specific Agreements. Following the execution of a Development & Commercialization Agreement for a given Program:

4.9.1 License Agreement. After the Parties have entered into a License Agreement to govern the further Development and Commercialization of Licensed Product under a specified Program, no Committee shall have any review or decision-making authority.

4.9.2 Co-Development and Co-Commercialization Agreement. After the Parties have entered into a Co-Development and Co-Commercialization Agreement to govern the further Development and Commercialization of Shared Products for a specified Program, the

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Committees other than the JRC shall continue to have review and oversight of the Development, Manufacture and Commercialization of Shared Products as set forth in this Agreement and the applicable Co-Development and Co-Commercialization Agreement.

4.10 Decision-Making.

4.10.1 Committee; Referral to JSC and to Executive Officers. All decisions of a Committee shall be made by unanimous vote, with each Party’s Representatives collectively having one (1) vote, and shall be set forth in minutes approved by both Parties. Upon [**] prior written notice, either Party may convene a special meeting of a Committee for the purpose of resolving any failure to reach agreement on a matter within the scope of the authority and responsibility of such Committee. No Committee shall have the authority to resolve any dispute involving the breach or alleged breach of this Agreement and shall not have any power to amend, modify or waive the terms of this Agreement (including any amendment of the Development Candidate Criteria), any Development & Commercialization Agreement or any Supply Agreement (or any other agreement between the Parties), or to alter, increase, expand or waive compliance by a Party with a Party’s obligations under this Agreement or any Development & Commercialization Agreement. If the JRC, JDC, JCC or JPC is unable to reach agreement on any matter so referred to it for resolution by one or both Parties within [**] after the matter is so referred to it, such matter shall be referred to the JSC for resolution. If the JSC is unable to reach agreement on any matter within [**] after the matter is referred to it or first considered by it, such matter shall be referred to the Executive Officers for resolution.

4.10.2 Decision-Making Authority. If the matter is not resolved by the Executive Officers after discussions between such Executive Officers within [**] after referral to the Executive Officers, then, on a Program-by-Program basis, subject to Section 4.11 and except as otherwise provided herein (a) [**] Executive Officer shall have the right to decide the unresolved matter as to [**] and (b) the right to decide the unresolved matter as to [**].

4.10.3 Notwithstanding the foregoing, neither Party shall have the right to finally resolve a dispute pursuant to Section 4.10.2:

(i) in a manner that excuses such Party from any of its obligations specifically enumerated under this Agreement;

(ii) in a manner that negates any consent rights or other rights specifically allocated to the other Party under this Agreement;

(iii) to resolve any dispute involving the breach or alleged breach of this Agreement;

(iv) to resolve a matter if the provisions of this Agreement specify that unanimous or mutual agreement of the Parties or a Committee, or consent of the other Party, is required for such matter;

(v) in a manner that would require the other Party to perform any act that is inconsistent with any Law;

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(vi) to determine whether or not a milestone event has been achieved under a Development & Commercialization Agreement or whether or not a Qualified Early Exercise I&I Program has satisfied the criteria set forth on Schedule 1.1.83; or

(vii) otherwise expand a Party’s rights or reduce a Party’s obligations under this Agreement or any Development & Commercialization Agreement.

4.11 Scope of Governance. Notwithstanding the creation of each of the Committees, each Party shall retain the rights, powers and discretion granted to it under this Agreement (including, in the case of Celgene, Celgene’s rights to designate Designated Development Programs pursuant to Section 2.3.2(b), to designate Continuation Programs pursuant to Section 2.4.2, and to elect whether to exercise Options pursuant to Section 3.1), and no Committee shall be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided herein, or the Parties expressly so agree in writing. It is understood and agreed that issues to be formally decided by a particular Committee are only those specific issues that are expressly provided in this Agreement to be decided by such Committee, as applicable.

4.12 Agios Right to Discontinue Participation. Notwithstanding anything in this ARTICLE IV to the contrary, Agios shall have the right to discontinue its participation in, and to not appoint members to, any Committee or any subcommittee or project team upon [**] prior written notice to Celgene; provided that, within such [**] period, Agios shall have [**] in place of its representative [**], subject to Celgene’s prior written consent, such consent not to be unreasonably withheld, and [**]. If, at any time, following issuance of such a notice, Agios wishes to resume participation in any committee or Subcommittee, Agios shall notify Celgene in writing and, thereafter, Agios’ representatives to such committee or Subcommittee shall be entitled to attend any subsequent meeting of such committee or Subcommittee and to participate in the activities of, and decision-making by, such committee or Subcommittee as provided in this ARTICLE IV as if such notice had not been issued by Agios pursuant to this Section 4.12. If Agios discontinues participation in, or does not appoint members [**] to, any Committee or any subcommittee or project team, (a) it shall not be a breach of this Agreement; (b) no consideration shall be required to be returned; (c) unless and until such members are appointed, Celgene may unilaterally discharge the roles of such Committee, subcommittee or project team, as applicable, for which members were not appointed, including making in Celgene’s sole discretion all decisions of such Committee, subcommittee, or project team, including decisions requiring mutual agreement; provided that Celgene shall not unilaterally discharge the roles of such Committee, subcommittee or project team, as applicable, as permitted under this ARTICLE IV unless Agios has not appointed any members within [**] after Celgene has completed its appointment of its members; and (d) Agios shall abide by all decisions made by Celgene on behalf of the applicable Committee, subcommittee, or project team and shall continue to perform its obligations hereunder. If Agios thereafter appoints members to a Committee, subcommittee or project team, Celgene shall no longer have the unilateral right to discharge the role of such Committee, subcommittee or project team, as applicable and the applicable Committee shall be re-formed.

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ARTICLE V

LICENSES; EXCLUSIVITY

5.1 Licenses.

5.1.1 License to Agios. On a Program-by-Program basis, commencing on the Effective Date and extending until expiration of the applicable Option Exercise Window, subject to the terms and on the conditions set forth in this Agreement, Celgene hereby grants and shall cause (within [**] after the Effective Date) its Affiliates to grant to Agios a non-exclusive, worldwide, royalty-free right and license, with the right to grant sublicenses (subject to Section 5.1.4), under the Celgene Intellectual Property and Celgene Collaboration Intellectual Property, solely to permit Agios to perform its obligations under the Research Plan for each Program that is subject to an Option exercisable by Celgene under Section 3.1 to Develop and/or Manufacture, for purposes of such Program, Program Compounds and/or Program Products during the Option Term.

5.1.2 License to Celgene. On a Program-by-Program basis, commencing on the Effective Date until the expiration of the applicable Option Exercise Window, subject to the terms and on the conditions set forth in this Agreement, Agios hereby grants to Celgene a non-exclusive, worldwide, royalty-free right and license, with the right to grant sublicenses (subject to Section 5.1.4), under the Agios Intellectual Property, solely to permit Celgene to perform its obligations under the Research Plan for each Program that is subject to an Option exercisable by Celgene under Section 3.1 to Develop and/or Manufacture, for purposes of such Program, Program Compounds and/or Program Products during the Option Term.

5.1.3 Additional Licenses. Each Development & Commercialization Agreement will specify additional licenses for the Development, Manufacture and/or Commercialization of Compounds (as defined in Appendix A or Appendix B) and Post-Exercise Products for the Post-Exercise Programs that are subject to such agreement.

5.1.4 Sublicenses. Agios shall have the right to grant sublicenses under the rights granted to it under Section 5.1.1 to its Affiliates and Third Party contractors, and Celgene shall have the right to grant sublicenses under the rights granted to it under Section 5.1.2 to its Affiliates and Third Party contractors. Each such sublicense granted by either Party shall be subject to and consistent with the terms and conditions of this Agreement, and each Party shall provide the other Party with an unredacted copy of such sublicense.

5.1.5 Rights Retained by the Parties. For purposes of clarity, each Party retains all rights under Know-How and Patents Controlled by such Party not expressly granted to the other Party pursuant to this Agreement.

5.1.6 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party shall be deemed by estoppel, implication or otherwise to have granted the other Party any license or other right to any intellectual property of such Party.

5.1.7 Section 365(n) of the Bankruptcy Code. All licenses granted under this Agreement are deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of

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rights to “intellectual property” as defined in Section 101 of such Code. Each Party, as licensee, may fully exercise all of its rights and elections under the Bankruptcy Code. The Parties further agree that, if a Party elects to retain its rights as a licensee under any Bankruptcy Code, such Party shall be entitled to complete access to any technology licensed to it hereunder and all embodiments of such technology. Such embodiments of the technology shall be delivered to the licensee Party not later than: (a) the commencement of bankruptcy proceedings against the licensor, upon written request, unless the licensor elects to perform its obligations under the Agreement, or (b) if not delivered under clause (a), upon the rejection of this Agreement by or on behalf of the licensor, upon written request. Any agreements supplemental hereto will be deemed to be “agreements supplementary to” this Agreement for purposes of Section 365(n) of the Bankruptcy Code. As used herein, “Bankruptcy Code” means the U.S. Bankruptcy Code and any foreign equivalent thereto in any country having jurisdiction over a Party or its assets.

5.2 Exclusivity.

5.2.1 Agios. During the Option Term, except as expressly permitted in this Agreement or any Development & Commercialization Agreement, or mutually agreed in writing by the Parties, neither Agios nor its Affiliates shall, directly or indirectly, Develop, Manufacture or Commercialize any [**] (a) in the IO Field that [**], (b) in the I&I Field that [**], (c) that exerts its efficacy primarily through [**] of the Program Target [**] or (d) that exerts its efficacy primarily through [**] of the Program Target [**], in each case ((a), (b), (c) and (d)) [**], except for the following:

(a) [**] Developed, Manufactured or Commercialized under Programs in accordance with this Agreement or any Development & Commercialization Agreement; and

(b) [**] that exert their efficacy primarily through the [**] of Program Targets that are the subject of Programs the rights to which have reverted to Agios in accordance with Section 2.12 or 11.5.1(a).

5.2.2 Celgene. During the period commencing on the date that Celgene [**] with respect to a [**] and continuing until [**], except as expressly permitted in this Agreement, or mutually agreed in writing by the Parties, neither Celgene nor its Affiliates shall, directly or indirectly, Develop, Manufacture or Commercialize [**] that (a) if such Program is anticipated to be in the IO Field [**], (b) if such Program is anticipated to be in the I&I Field [**], (c) if such Program is the [**] Program, exerts its efficacy primarily through [**] of the Program Target [**] or (d) if such Program is the [**] Program, exerts its efficacy primarily through [**] of the Program Target [**], in each case ((a), (b), (c) and (d)) [**], except for [**] Developed, Manufactured or Commercialized under Programs in accordance with this Agreement or any Development & Commercialization Agreement.

5.2.3 Certain Exceptions to Exclusivity.

(a) Incidental Discoveries. A Party shall be deemed not to be, directly or indirectly (whether such activities are conducted internally or with or through a Third Party), Developing, Manufacturing or Commercializing in violation of the provisions of this Section 5.2 as a result of conducting a research program or discovery effort (or Developing, Manufacturing

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or Commercializing a therapeutic modality resulting from such research program or discovery effort) that has as its specified and primary goal, as evidenced by laboratory notebooks or other relevant documents contemporaneously kept, taken as a whole, to discover or Develop compounds that are not within the prohibitions set forth in this Section 5.2.

(b) Celgene Exception. It is agreed and understood by the Parties that any Celgene research, discovery and commercialization activities [**], whether such activities are undertaken by Celgene alone or in conjunction with one or more partners, licensors, licensees, and/or collaborators, are expressly excluded from the provisions of this Section 5.2. In particular and without limitation, Celgene research, discovery, and commercialization activities related to (i) [**]; (ii) [**]; (iii) [**]; (iv) [**]; (v) [**]; or (vi) [**], are expressly excluded from the provisions of this Section 5.2.

(c) Academic Collaborations. Notwithstanding the provisions of Section 5.2.1 or 5.2.2, as applicable, each Party shall be permitted to perform any of the activities that would otherwise be prohibited under Section 5.2.1 or 5.2.2, as applicable, and in relation to the applicable Program Target, if such activities are (i) the subject of an existing agreement between such Party and an academic institution or academic collaborator entered into prior to the Effective Date, provided that such Party shall not be permitted to amend any such agreement unless such amendment contains provisions consistent with the terms and conditions of such agreement in effect as of the Effective Date with respect to (A) [**], or (ii) the subject of a new agreement entered into between such Party and an academic institution or academic collaborator that contains terms and conditions with respect to the [**] consistent with the terms and conditions of [**]; provided that, if any [**] of an amendment described in (a) or an agreement described in (b) would not be [**] the agreements between such Party and an academic institution or academic collaborator entered into prior to the Effective Date, such Party [**].

(d) Competitive Programs. Section 5.2.1 or 5.2.2, as applicable, shall not apply if, during the [**], any Party or its Affiliates (other than in [**] with respect to such Party) merges or consolidates with, or otherwise acquires, a Third Party that is then engaged in activities that would otherwise constitute a breach of this Section 5.2 by any Party or its Affiliates (a “Competitive Program”); it being understood and agreed that, unless the Parties agree otherwise in writing, such Party that is engaged in a Competitive Program (the “Competitive Program Party”) shall, within [**] after the date of such merger, consolidation or acquisition, notify the other Party that it intends to either: (i) terminate, or cause its relevant Affiliate to terminate, the Competitive Program or (ii) divest, or cause its relevant Affiliate to divest, whether by license or otherwise, the Competitive Program. If the Competitive Program Party notifies the other Party within such [**] period that it intends to [**], such Competitive Program, the Competitive Program Party or its relevant Affiliate, shall (i) terminate such Competitive Program as quickly as possible, and in any event within [**] (unless applicable Law requires a longer termination period) after the Competitive Program Party delivers such notice to the other Party; and (ii) confirm to the other Party when such termination has been completed, and the Competitive Program Party’s continuation of the Competitive Program during such [**] (or, as required by applicable Law, longer) period shall not constitute a breach of the Competitive Program Party’s exclusivity obligations under Section 5.2.1 or 5.2.2, as applicable. If the Competitive Program Party notifies the other Party within such [**] period that it intends

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to divest such Competitive Program, the Competitive Program Party or its relevant Affiliate shall use all reasonable efforts to effect such divestiture as quickly as possible, and in any event within [**] after the Competitive Program Party delivers such notice to the other Party, and shall confirm to the other Party when such divestiture has been completed. If the Competitive Program Party or its relevant Affiliate fails to complete such divestiture within such [**] period, but has used reasonable efforts to effect such divestiture within such [**] period, then, unless otherwise required by applicable Law, such [**] period shall be extended for such additional reasonable period thereafter as is necessary to enable such Competitive Program to be in fact divested, not to exceed an additional [**]; provided that such additional [**] period shall be extended for such period as is necessary to obtain any governmental or regulatory approvals required to complete such divestiture if the Competitive Program Party or its relevant Affiliate is using good faith efforts to obtain such approvals. The Competitive Program Party’s continuation of the Competitive Program during such divestiture period shall not constitute a breach of the Competitive Program Party’s exclusivity obligations under 5.2.1 or 5.2.2, as applicable.

(e) Certain Permitted Activities.

(i) The [**] shall not constitute a breach of Section 5.2.1 or 5.2.2, as applicable. Each Party shall report to the JSC on a [**] basis [**] and that would otherwise breach Section 5.2.1 or 5.2.2, as applicable. For clarity, [**] without violation of 5.2.1 or 5.2.2, as applicable, [**] shall not constitute [**] in violation of such Party’s exclusivity obligations under this Section 5.2 as long as [**].

(ii) The [**] shall not constitute a breach of Section 5.2.2; provided that [**] shall be subject to Section 5.2.2 and shall not be permitted under this Section 5.2.3(e)(ii). [**].

(iii) The restrictions set forth in Section 5.2.1 or 5.2.2, as applicable, shall not be deemed to prevent either Party or its respective Affiliates from (A) fulfilling its obligations under this Agreement, and (B) engaging any subcontractors in accordance with Section 2.9 of this Agreement.

(iv) If [**] occurs with respect to either Party with a Third Party and the Third Party already is conducting or is planning to conduct activities that would cause a Party or an Affiliate to violate Section 5.2.1 or 5.2.2, as applicable, (an “Acquirer Program”), then such Third Party [**]; provided that (i) [**] in any Acquirer Program, (ii) [**] in any Acquirer Program, (iii) [**] in any such Acquirer Program, and (iv) [**] to such Acquirer Program, including by [**] the activities under this Agreement, and the activities covered under such Acquirer Program (except that this requirement shall not apply to [**] activities under such Acquirer Program).

(v) Clinical Combinations. Notwithstanding anything to the contrary in this Agreement, for purposes of this Section 5.2, either Party shall, at all times, have the right to conduct clinical Development of Program Products, alone or with Third Parties, in which the [**] for purposes of enabling such Party and such Third Party to include the relevant use of Program Products [**], provided that [**] may grant to any such Third Party the right to sell, offer for sale and otherwise commercially exploit such Program Products.

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ARTICLE VI

FINANCIAL TERMS

6.1 Upfront Payment. In consideration for the rights granted to Celgene under this Agreement, Celgene will make the following one-time, non-refundable, non-creditable upfront payments within [**] after the Effective Date:

(a) Celgene Corp. shall pay to Agios [**] U.S. Dollars ($[**]); and

(b) Celgene RIVOT shall pay to Agios [**] U.S. Dollars ($[**]).

6.2 Designation Fees. On a Program-by-Program basis, Celgene will make a non-refundable payment to Agios of Eight Million Dollars ($8,000,000) (the “Designation Fee”) within [**] after Celgene’s designation of each such Program for further Development pursuant to Section 2.3.2(b) or 2.4.2, as applicable.

6.3 Research Term Extension Fee. Celgene may elect, in its sole discretion, to extend the Research Term pursuant to Section 2.1.2 by making a non-refundable payment to Agios of Forty Million Dollars ($40,000,000) for each one (1) year extension (the “Research Term Extension Fee”) within [**] after receipt of Agios’ invoice therefor.

6.4 Development Costs and Manufacturing Costs. As between the Parties, except as expressly set forth herein or otherwise agreed by the Parties, Agios shall be solely responsible, on a Program-by-Program basis, for any and all costs and expenses it incurs in connection with the conduct of Development and Manufacturing activities for such Program that occur before Celgene exercises the Option for such Program, after which the costs of further Development, Manufacturing and Commercialization activities, for the applicable Post-Exercise Products shall be borne by the Parties in accordance with the applicable Development & Commercialization Agreement.

6.5 Financial Records. Agios shall keep, and shall require its Affiliates to keep, complete and accurate books and records containing all data reasonably required for the calculation and verification of amounts payable by Celgene under this ARTICLE VI in accordance with the applicable Accounting Standards. Agios shall keep, and shall require its Affiliates to keep, such books and records for at least [**] following the end of the Calendar Year to which they pertain. Such books of accounts shall be kept at the principal place of business of the financial personnel with responsibility for preparing and maintaining such records.

6.6 Tax Matters.

6.6.1 Withholding Taxes.

(a) Each Party shall be entitled to deduct and withhold from any amounts payable under this Agreement such taxes as are required to be deducted or withheld therefrom under any provision of applicable Law. The Party that is required to make such withholding (the “Paying Party”) will: (i) deduct those taxes from such payment, (ii) timely

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remit the taxes to the proper taxing authority, and (iii) send evidence of the obligation together with proof of tax payment to the recipient Party (the “Payee Party”) on a timely basis following that tax payment; provided, however, that, before making any such deduction or withholding, the Paying Party shall give the Payee Party notice of the intention to make such deduction or withholding (and such notice, which shall set forth in reasonable detail the authority, basis and method of calculation for the proposed deduction or withholding, shall be given at least a reasonable period of time before such deduction or withholding is required, in order for such Payee Party to obtain reduction of or relief from such deduction or withholding). Each Party agrees to cooperate with the other Parties in claiming refunds or exemptions from such deductions or withholdings under any relevant agreement or treaty or other applicable Law which is in effect to ensure that any amounts required to be withheld pursuant to this 6.6.1(a) are reduced in amount to the fullest extent permitted by applicable Law. In addition, the Parties shall co-operate in accordance with applicable Laws to minimize [**] in connection with this Agreement, as applicable.

(b) Tax Documentation. Each Party has provided a properly completed and duly executed IRS Form W-9 or applicable Form W-8 to the other Parties. Each Party and any other recipient of payments under this Agreement shall provide to the other Party, at the time or times reasonably requested by such other Parties or as required by applicable Law, such other properly completed and duly executed documentation as will permit payments made under this Agreement to be made without, or at a reduced rate of, withholding for taxes, and the applicable payment shall be made without (or at a reduced rate of) withholding to the extent permitted by such documentation, as reasonably determined by the Paying Party.

6.6.2 Tax Cooperation. Upon request, each Party shall use Commercially Reasonable Efforts to cooperate with the other Party to mitigate, reduce or eliminate adverse tax consequences to such other Party from changes in applicable Law, the use of present or future Affiliates of either Party to engage in transactions described in or contemplated by this Agreement, or from other activities or transactions described in or contemplated by this Agreement.

6.7 Payments; Currency Exchange. Payments of all amounts payable under this ARTICLE VI shall be made directly by Celgene to the bank account designated in writing by Agios. Unless otherwise expressly stated in this Agreement, all amounts specified in, and all payments made under, this Agreement shall be in United States Dollars. Conversion of sales recorded in local currencies to Dollars shall be performed in a manner consistent with Celgene’s normal practices used to prepare its audited financial statements for internal and external reporting purposes. For clarity, Celgene sets currency transaction rates for the month on the last business day of the prior calendar month. Agios has the right to verify that the exchange rates used by Celgene for a given month are within the trading range of the last business day of the prior calendar month.

6.8 Late Payments. Celgene shall pay interest to Agios on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate per annum equal to the lesser of the [**], or the highest rate permitted by applicable Law, calculated on the number of days such payments are paid after the date such payments are due; provided that, with respect to any disputed payments, no interest payment

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shall be due until such dispute is resolved and the interest which shall be payable thereon shall be based on the finally-resolved amount of such payment, calculated from the original date on which the disputed payment was due through the date on which payment is actually made.

ARTICLE VII

INTELLECTUAL PROPERTY

7.1 Ownership of Inventions. Inventorship of Inventions shall be determined by application of U.S. patent law pertaining to inventorship, and ownership shall follow inventorship.

7.2 Prosecution of Patents.

7.2.1 As between the Parties, the Party that [**] a Patent relating to a Program, unless otherwise explicitly provided under a Development & Commercialization Agreement, shall have the sole right (but not the obligation) to Prosecute such Patent, at such Party’s expense, and [**], unless otherwise explicitly provided under a Development & Commercialization Agreement, shall have the sole right (but not the obligation) to Prosecute all Joint Collaboration Patents, at [**] sole expense.

7.2.2 Until the earlier of (a) Celgene’s exercise of its Option and entry into a Development & Commercialization Agreement for a given Designated Development Program or Continuation Program, or (b) the expiration of the Option Exercise Window for such Qualified Early Exercise I&I Program, Designated Development Program or Continuation Program, [**] shall, with respect to any Agios Patent or Joint Collaboration Patent related to such Research Program, Designated Development Program or Continuation Program, (x) keep [**] informed, via the JPC, as to material developments with respect to the Prosecution of such Agios Patent or Joint Collaboration Patent, including by providing copies of all substantive office actions or any other substantive documents in connection with such Agios Patents or Joint Collaboration Patents that [**] receives from any patent office, and (y) provide [**] with a reasonable opportunity to comment substantively on the Prosecution of such Agios Patents or Joint Collaboration Patents, prior to taking material actions (including the filing of initial applications), and will in good faith consider any comments made by and actions recommended by [**], provided, however, that [**] does so promptly and consistently with any applicable filing deadlines.

7.3 Defense of Claims Brought by Third Parties. If a Party becomes aware of any actual or potential claim that the Development, Manufacture or Commercialization of any Program Compound or Program Product infringes or misappropriates the intellectual property rights of any Third Party, such Party shall [**]. Certain additional rights and obligations of the Parties with respect to any such claim will be set forth in the Development & Commercialization Agreement for such Program (in each case, if applicable).

7.4 Enforcement and Defense of Patents. As between the Parties, the Party that [**] a Patent relating to a Program, and [**] with respect to any Joint Collaboration Patents, unless otherwise explicitly provided under a Development & Commercialization Agreement, shall have the sole right, but not the obligation, to institute, prosecute, and control any action or proceeding with respect to any infringement or Defense of such Patent, by counsel of its own choice, in such Party’s own name and under such Party’s direction, control and expense.

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7.5 Third Party Licenses.

7.5.1 Notice. On a Program-by-Program basis, if, at any time during the Term, [**] reasonably determines [**] for the Development, Manufacture or Commercialization of any Program Compound or Program Product that is the subject of Development or Manufacturing efforts under this Agreement (and that is the subject of an Option), then [**] will [**].

7.5.2 Pre-Option. Prior to the exercise of the Option, on a Program-by-Program basis, [**] shall have the right, but not the obligation, at its sole discretion, to determine whether [**] wishes to obtain one or more licenses, on commercially reasonable terms, from one or more Third Parties for the Development, Manufacture or Commercialization of any Program Compound or Program Product that is the subject of Development or Manufacturing efforts under this Agreement (a “Third Party License”) or take other appropriate measures in view of such Third Party rights. In each case, [**] shall have the right [**] with respect to such Third Party rights.

7.5.3 Post-Option. On a Program-by-Program basis, following the exercise of the Option for such Program, the rights and obligations of the Parties with respect to obtaining licenses from Third Parties or taking other appropriate measures in view of such Third Party rights shall be as set forth in the Development & Commercialization Agreement for such Post-Exercise Program.

7.5.4 Costs. Subject to Section 2.2.2, unless otherwise allocated in a Development & Commercialization Agreement or agreed by the Parties in writing, the costs associated with negotiating and obtaining rights under any Third Party License obtained under this Section 7.5 shall be borne by [**], and the costs associated with exercising rights under any Third Party License obtained under this Section 7.5 shall be borne by [**].

ARTICLE VIII

CONFIDENTIALITY

8.1 Confidential Information. Each Party agrees that a Party (the “Receiving Party”) receiving Confidential Information of any other Party (the “Disclosing Party”) shall (x) maintain in confidence such Confidential Information using not less than the efforts such Receiving Party uses to maintain in confidence its own proprietary information of similar kind and value, but in no event less than a reasonable degree of effort, (y) not disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly permitted below, and (z) not use such Confidential Information for any purpose except those permitted by this Agreement (it being understood that this clause (z) shall not create or imply any rights or licenses not expressly granted under this Agreement). No Confidential Information of the Disclosing Party shall be used by the Receiving Party except in performing its obligations or exercising rights explicitly granted under this Agreement or a Development & Commercialization Agreement, except to the extent that the Confidential Information:

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(a) was known by the Receiving Party or its Affiliates prior to its date of disclosure to the Receiving Party, as established by written evidence; or

(b) is lawfully disclosed to the Receiving Party or its Affiliates by sources other than the Disclosing Party rightfully in possession of the Confidential Information; or

(c) becomes published or generally known to the public through no fault or omission on the part of the Receiving Party or its Affiliates; or

(d) is independently developed by or for the Receiving Party or its Affiliates without reference to or reliance upon such Confidential Information, as established by written records.

8.2 Permitted Disclosure. The Receiving Party may provide the Disclosing Party’s Confidential Information:

(a) to the Receiving Party’s respective employees, consultants and advisors, and to the employees, consultants and advisors of such Party’s Affiliates, who have a need to know such information and materials for performing obligations or exercising rights expressly granted under this Agreement or any Development & Commercialization Agreement and have an obligation to treat such information and materials as confidential;

(b) to patent offices in order to seek or obtain Patents or to Regulatory Authorities in order to seek or obtain approval to conduct clinical trials or to gain Regulatory Approval with respect to any Program Compound(s) or Program Product(s), as contemplated by this Agreement or any Development & Commercialization Agreement; provided that such disclosure may be made only following reasonable notice to the Disclosing Party and to the extent reasonably necessary to seek or obtain such Patents or approvals; or

(c) if such disclosure is required by judicial order or applicable Law or to defend or prosecute litigation or arbitration; provided that, prior to such disclosure, to the extent permitted by Law, the Receiving Party promptly notifies the Disclosing Party of such requirement, cooperates with the Disclosing Party to take whatever action it may deem appropriate to protect the confidentiality of the information and furnishes only that portion of the Disclosing Party’s Confidential Information that the Receiving Party is legally required to furnish.

8.3 Publicity; Terms of this Agreement; Non-Use of Names.

8.3.1 Except as required by judicial order or applicable Law (in which case, Section 8.3.2 must be complied with) or as explicitly permitted by this ARTICLE VIII, neither Party shall make any public announcement concerning this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. The Party preparing any such public announcement shall provide the other Party with a draft thereof at least [**] prior to the date on which such Party would like to make the public announcement (or, in extraordinary circumstances, such shorter period as required to comply with applicable

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Law). Notwithstanding the foregoing, the Parties shall issue a press release, in a form mutually agreed to by the Parties, within [**] after the Effective Date. Neither Party shall use the name, trademark, trade name or logo of the other Party or its employees in any publicity or news release relating to this Agreement or its subject matter, without the prior express written permission of the other Party. For purposes of clarity, either Party may issue a press release or public announcement or make such other disclosure relating to this Agreement if the content of such press release, public announcement or disclosure (a) (i) does not consist of financial information and has previously been made public other than through a breach of this Agreement by the issuing Party or its Affiliates, (ii) is contained in such Party’s financial statements prepared in accordance with Accounting Standards, or (iii) is contained in the Redacted Version of this Agreement, and (b) is material to the event or purpose for which the new press release or public announcement is made.

8.3.2 Notwithstanding the terms of this ARTICLE VIII:

(a) Either Party shall be permitted to disclose the existence and terms of this Agreement to the extent required, in the reasonable opinion of such Party’s legal counsel, to comply with applicable Laws, including the rules and regulations promulgated by the Securities and Exchange Commission or any other Governmental Authority. Notwithstanding the foregoing, before disclosing this Agreement or any of the terms hereof pursuant to this Section 8.3.2, the Parties will coordinate in advance with each other in connection with the redaction of certain provisions of this Agreement with respect to any filings with the U.S. Securities and Exchange Commission (“SEC”), London Stock Exchange, the UK Listing Authority, NYSE, the NASDAQ Stock Market or any other stock exchange on which securities issued by a Party or a Party’s Affiliate are traded (the “Redacted Version”), and each Party will use commercially reasonable efforts to seek confidential treatment for such terms as may be reasonably requested by the other Party; provided that the Parties will use commercially reasonable efforts to file redacted versions with any governing bodies which are consistent with the Redacted Version.

(b) Notwithstanding Section 8.1, the Receiving Party may disclose Confidential Information belonging to the Disclosing Party, and Confidential Information deemed to belong to both the Disclosing Party and the Receiving Party, to the extent (and only to the extent) such disclosure is reasonably necessary in the following instances:

(i) subject to Section 8.3.2(a), complying with applicable Laws (including the rules and regulations of the SEC or any national securities exchange) and with judicial process, if in the reasonable opinion of the Receiving Party’s counsel, such disclosure is necessary for such compliance;

(ii) disclosure, solely on a “need to know basis,” to (A) Affiliates, subcontractors, advisors (including attorneys and accountants), (B) subject to Section 8.3.2(b)(iii), investment bankers, and (C) in each case of (A) and (B), their and each of the Parties’ respective directors, employees, contractors and agents; provided that, in all cases of (A), (B) and (C), prior to any such disclosure, each disclosee must be bound by written obligations of confidentiality, non-disclosure and non-use no less restrictive than the obligations set forth in this ARTICLE VIII (provided, however, that, in the case of prospective investment

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bankers, the term of confidentiality may be [**] from the date of disclosure and in the case of legal advisors, no written agreement shall be required), which for the avoidance of doubt, will not permit use of such Confidential Information for any purpose except those permitted by this Agreement; provided, however, that, in each of the above situations, the Receiving Party shall remain responsible for any failure by any Person who receives Confidential Information pursuant to this Section 8.2.3(b)(ii) to treat such Confidential Information as required under this ARTICLE VIII; and

(iii) in the case of any disclosure of this Agreement, or any executed Development & Commercialization Agreement, to any actual or potential acquirer, assignee, licensee, licensor, investment banker, institutional investor, lender or other financial partners, such disclosure shall solely be [**]; it being understood and agreed that, in connection with a proposed Change of Control with respect to such Party, only [**] this Agreement or such Development & Commercialization Agreement, as applicable, to such Third Party; provided that a Party may also disclose an unredacted version of this Agreement to Third Party attorneys, professional accountants and auditors who are engaged by licensors and lenders and who are under obligations of confidentiality not to disclose the unredacted terms of this Agreement to such licensors or lenders for the purpose of confirming such Party’s compliance with the terms of its applicable license and loan agreements with such licensors and lenders.

(c) [**]. Such disclosures may include achievement of milestones, significant events in the development and regulatory process, commercialization activities and the like. In addition to the initial press release described in Section 8.3.1, a Party (the “Requesting Party”) may elect to make any such public disclosure of such achievement of milestones, significant events in the Development and regulatory process and Commercialization activities, and in such event it shall first notify the other Party (the “Cooperating Party”) of such planned press release or public announcement and provide a draft for review at least [**] in advance of issuing such press release or making such public announcement (or, with respect to press releases and public announcements that are required by applicable Law, or by regulation or rule of any public stock exchange (including NASDAQ), with as much advance notice as possible under the circumstances if it is not possible to provide notice at least [**] in advance); provided, however, that a Party may issue such press release or public announcement without such prior review by the other Party if (i) the contents of such press release or public announcement have previously been made public other than through a breach of this Agreement by the issuing Party and (ii) such press release or public announcement does not materially differ from the previously issued press release or other publicly available information. The Cooperating Party may notify the Requesting Party of any reasonable objections or suggestions that the Cooperating Party may have regarding the proposed press release or public announcement, and the Requesting Party shall reasonably consider any such objections or suggestions that are provided in a timely manner. The principles to be observed in such disclosures shall include accuracy, compliance with applicable Law and regulatory guidance documents, reasonable sensitivity to potential negative reactions of the FDA (and its foreign counterparts) and the need to keep investors informed regarding the Requesting Party’s business.

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8.4 Publications. The Parties agree that decisions regarding the timing and content of Publications shall be subject to the oversight and approval of the JSC and neither Party nor its

Affiliates shall have the right to make Publications pertaining to any Program Compound(s), Program Product(s) or Program Target(s) except as provided herein. If a Party or its Affiliates desire to make a Publication, such Party must comply with the following procedure:

8.4.1 The publishing Party shall provide the JSC and the non-publishing Party with an advance copy of the proposed Publication, and the JSC shall then have [**] prior to submission for any Publication ([**] in the case of an abstract or oral presentation) in which to determine whether the Publication meets the Publication Guidelines and may be published and under what conditions, including (a) delaying sufficiently long to permit the timely preparation and filing of a patent application or (b) specifying changes the JSC reasonably believes are necessary to preserve any Patents or Know-How belonging (whether through ownership or license, including under this Agreement) in whole or in part to the non-publishing Party.

8.4.2 In addition, if the non-publishing Party informs the publishing Party that such Publication, in the non-publishing Party’s reasonable judgment, discloses any Confidential Information of the non-publishing Party or could be expected to have a material adverse effect on any Know-How which is Confidential Information of the non-publishing Party, such Confidential Information or Know-How shall be deleted from the Publication.

8.4.3 Each Party shall have the right to present its Publications approved pursuant to this Section 8.4.3 at scientific conferences, including at any conferences in any country in the world, subject to any conditions imposed by the JSC in its approval.

8.4.4 Notwithstanding the foregoing, the Parties acknowledge that, to the extent that any Publication relates to Agios Intellectual Property that Agios has licensed from a Third Party, its licensor(s) may have retained the right to publish certain information, and nothing in this Section 8.4.4 is intended to restrict the exercise of such rights; provided that, to the extent that Agios has the right to review and comment on any such publications, Agios shall, to the extent permissible under its agreements with such Third Parties, exercise such rights after consultation with Celgene.

8.4.5 Notwithstanding the foregoing, the Parties acknowledge that, to the extent that any Publication relates to Celgene Intellectual Property that Celgene has licensed from a Third Party, its licensor(s) may have retained the right to publish certain information, and nothing in this Section 8.4.5 is intended to restrict the exercise of such rights; provided that, to the extent that Celgene has the right to review and comment on any such publications, Celgene shall, to the extent permissible under its agreements with such Third Parties, exercise such rights after consultation with Agios.

8.4.6 For purposes of convenience, the JSC may delegate its responsibilities under this Section 8.4.6 to one or more representatives of Agios and Celgene.

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8.5 Term. All obligations under Sections 8.1, 8.2, 8.3 and 8.6 shall survive termination or expiration of this Agreement and shall expire [**] following termination or expiration of this Agreement.

8.6 Return of Confidential Information.

8.6.1 Upon the expiration or termination of this Agreement, the Receiving Party shall return to the Disclosing Party all Confidential Information received by the Receiving Party from the Disclosing Party (and all copies and reproductions thereof). In addition, the Receiving Party shall destroy:

(a) any notes, reports or other documents prepared by the Receiving Party which contain Confidential Information of the Disclosing Party; and

(b) any Confidential Information of the Disclosing Party (and all copies and reproductions thereof) which is in electronic form or cannot otherwise be returned to the Disclosing Party.

8.6.2 Alternatively, upon written request of the Disclosing Party, the Receiving Party shall destroy all Confidential Information received by the Receiving Party from the Disclosing Party (and all copies and reproductions thereof) and any notes, reports or other documents prepared by the Receiving Party which contain Confidential Information of the Disclosing Party. Any requested destruction of Confidential Information shall be certified in writing to the Disclosing Party by an authorized officer of the Receiving Party supervising such destruction.

8.6.3 Nothing in this Section 8.6 shall require the alteration, modification, deletion or destruction of archival tapes or other electronic back-up media made in the ordinary course of business; provided that the Receiving Party shall continue to be bound by its obligations of confidentiality and other obligations under this ARTICLE VIII with respect to any Confidential Information contained in such archival tapes or other electronic back-up media.

8.6.4 Notwithstanding the foregoing,

(a) the Receiving Party’s legal counsel may retain one copy of the Disclosing Party’s Confidential Information solely for the purpose of determining the Receiving Party’s continuing obligations under this ARTICLE VIII; and

(b) the Receiving Party may retain the Disclosing Party’s Confidential Information and its own notes, reports and other documents;

(i) to the extent reasonably required (A) to exercise the rights and licenses of the Receiving Party expressly surviving expiration or termination of this Agreement; or (B) to perform the obligations of the Receiving Party expressly surviving expiration or termination of this Agreement; or

(ii) to the extent it is impracticable to do so without incurring disproportionate cost.

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Notwithstanding the return or destruction of the Disclosing Party’s Confidential Information, the Receiving Party shall continue to be bound by its obligations of confidentiality and other obligations under this ARTICLE VIII.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES

9.1 Mutual Representations. Agios and Celgene each represents, warrants and covenants to the other Party, as of the Effective Date, that:

9.1.1 Authority. It is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and has full corporate power and authority to enter into this Agreement or any applicable Development & Commercialization Agreement, and to carry out the provisions hereof or thereof, as applicable.

9.1.2 Consents. All necessary consents, approvals and authorizations of all government authorities and other Persons required to be obtained by it as of the Effective Date in connection with the execution, delivery and performance of this Agreement or any applicable Development & Commercialization Agreement, and the performance of its obligations hereunder or thereunder, as applicable, have been obtained.

9.1.3 No Conflict. Notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement, the performance of such Party’s obligations in the conduct of the Collaboration and the licenses and sublicenses to be granted pursuant to this Agreement (a) do not and will not conflict with or violate any requirement of applicable Laws existing as of the Effective Date and (b) do not and will not conflict with, violate, breach or constitute a default under any agreement or any provision thereof, or any contract, oral or written, to which it is a party or by which it or any of its Affiliates is bound, existing as of the Effective Date.

9.1.4 Enforceability. This Agreement has been duly executed and delivered on behalf of each Party and is a legal and valid obligation binding upon it and is enforceable in accordance with its terms.

9.1.5 Employee Obligations. To its knowledge, none of its or its Affiliates’ employees who have been, are or will be involved in the Collaboration are, as a result of the nature of such Collaboration to be conducted by the Parties, in violation of any covenant in any contract with a Third Party relating to non-disclosure of proprietary information, noncompetition or non-solicitation.

9.2 Additional Agios Representations. Agios represents, warrants and covenants to Celgene, as of the Effective Date, as follows:

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9.2.1 Agios possesses sufficient rights, authorizations and consents necessary to grant all rights and licenses it purports to grant to Celgene with respect to the Agios Intellectual Property under this Agreement.

9.2.2 Agios has not used, and during the Term will not knowingly use, any Know-How in a Program conducted by Agios that is encumbered by any contractual right of or obligation to a Third Party that conflicts or interferes with any of the rights or licenses granted or to be granted to Celgene hereunder or under any Development & Commercialization Agreement.

9.2.3 Agios has not granted, and during the Term Agios will not grant, any right or license, to any Third Party relating to any of the intellectual property rights it Controls, that conflicts with or limits the scope of the rights or licenses granted or to be granted to Celgene hereunder or under any Development & Commercialization Agreement.

9.2.4 There are no claims, litigations, suits, actions, disputes, arbitrations, or legal, administrative or other proceedings or governmental investigations pending or, to Agios’ knowledge, threatened against Agios, nor is Agios a party to any judgment or settlement, which would be reasonably expected to adversely affect or restrict the ability of Agios to consummate the transactions contemplated under this Agreement and to perform its obligations under this Agreement, or which would affect the Agios Intellectual Property, or Agios’ Control thereof, or any Program Target or Program Compound.

9.2.5 To Agios’ knowledge, the practice of the Agios Intellectual Property as contemplated under this Agreement does not (a) infringe any claims of any Patents of any Third Party or (b) misappropriate any Know-How of any Third Party.

9.2.6 None of (a) the Agios Patents owned by Agios or both Controlled by and Prosecuted by Agios and (b) to Agios’ knowledge, the Agios Patents Controlled but not Prosecuted by Agios are subject to any pending re-examination, opposition, interference or litigation proceedings.

9.2.7 There is no agreement with any Third Party to which Agios or any of its Affiliates is a party pursuant to which Agios Controls any Agios Patent that is necessary or, to Agios’ reasonable belief as of the Effective Date, reasonably useful to Develop, Manufacture or Commercialize any Program Compounds.

9.2.8 Neither Agios nor any of its Affiliates has granted any liens or security interests on the Agios Intellectual Property and the Agios Intellectual Property is free and clear of any mortgage, pledge, claim, security interest, covenant, easement, encumbrance, lien or charge of any kind, except in each case with respect to licenses, covenants not to sue, immunities from suit, standstills, releases and options which would not, in the aggregate, fundamentally frustrate the purposes of the Collaboration.

9.2.9 Schedule 9.2.9 contains a complete and accurate list of all Patents owned by Agios and/or its Affiliates as of the Effective Date that are included in the Patents licensed hereunder, indicating any co-owner(s), if applicable. Except as set forth on Schedule 9.2.9, Agios and its Affiliates do not own any Patent that is necessary or, to Agios’ reasonable belief as of the Effective Date, reasonably useful to research, Develop, Manufacture or Commercialize any Program Compounds.

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9.2.10 Agios and its Affiliates are not subject to any payment obligations to Third Parties as a result of the execution or performance of this Agreement.

9.3 Covenants.

9.3.1 Mutual Covenants. Each Party hereby covenants to the other Party that:

(a) all employees of such Party or its Affiliates or Third Party subcontractors working under this Agreement, or any Development & Commercialization Agreement, as applicable, will be under appropriate confidentiality provisions at least as protective as those contained in this Agreement, or any Development & Commercialization Agreement, as applicable, and, to the extent permitted under applicable Law, the obligation to assign all right, title and interest in and to their inventions and discoveries, whether or not patentable, to such Party as the sole owner thereof;

(b) to its knowledge, such Party will not (i) employ or use, nor hire or use any contractor or consultant that employs or uses, any individual or entity, including a clinical investigator, institution or institutional review board, debarred or disqualified by the FDA (or subject to a similar sanction by any Regulatory Authority outside the United States) or (ii) employ any individual who or entity that is the subject of an FDA debarment investigation or proceeding (or similar proceeding by any Regulatory Authority outside the United States), in each of subclauses (i) and (ii) in the conduct of its activities under this Agreement and any Development & Commercialization Agreement, as applicable;

(c) neither such Party nor any of its Affiliates shall, during the Term, grant any right or license to any Third Party relating to any of the intellectual property rights it owns or Controls which would conflict with any of the rights or licenses granted to the other Party hereunder or under any Development & Commercialization Agreement; and

(d) such Party and its Affiliates shall perform its activities pursuant to this Agreement and any Development & Commercialization Agreement, as applicable, in compliance (and shall ensure compliance by any of its subcontractors) in all material respects with all applicable Laws, including GCP, GLP and GMP as applicable and with respect to the research, Development, Manufacturing and Commercialization activities hereunder.

(e)

(i) The Parties shall, within [**] after the Effective Date, [**]; and

(ii) The Parties agree and acknowledge that (A) Appendices A-1 and A-2 shall supersede Appendix A for all purposes of this Agreement, and (B) as applicable, references to Appendix A or the “Co-Development and Co-Commercialization Agreement” in the other provisions of this Agreement shall be

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deemed replaced with references to the [**] (each, a “Co-Co Agreement”) shall be [**]. For the avoidance of doubt, the revision contemplated in this Section 9.3.1(e) shall include any necessary or incidental changes to Exhibits thereof. Neither Party shall take any position or cause their Affiliates to take any position inconsistent with this Section 9.3.1(e) for tax purposes (including with respect to filing U.S. federal income tax returns and in the course of any audit, review or litigation), unless otherwise required by applicable Law.

(iii) The Parties agree and acknowledge that, notwithstanding any other provision in this Agreement or the Co-Co Agreements, (A) [**], and (B) [**]; and

(iv) The Parties agree and acknowledge that (A) the terms of this Agreement with respect to the Term and (B) the terms of the form of License Agreement attached hereto as Appendix B [**]. Neither Party shall [**], unless otherwise required by applicable Law.

9.3.2 Agios Covenants During Option Term. Except to the extent expressly permitted under ARTICLE V, on a Program-by-Program basis, during the Option Term, neither Agios nor its Affiliates will, other than to an Affiliate of Agios who agrees in writing to be bound by the terms and conditions of this Agreement (a) assign, transfer, convey, encumber (including any liens or charges, but excluding any licenses, which are the subject of subsection (b), below) or dispose of, or enter into any agreement with any Third Party to assign, transfer, convey, encumber (including any liens or charges, but excluding any licenses, which are the subject of subsection (b), below) or dispose of, any assets specifically related to such Program, including with respect to the applicable Program Compound(s), Program Product(s) and then-identified Companion Diagnostic(s), or pre-clinical study or Clinical Trial results or other data specifically related to such Program, or any intellectual property specifically related to any of the foregoing (with respect to each Program, the “Agios Program Assets”), except to the extent such assignment, transfer, conveyance, encumbrance or disposition would not fundamentally frustrate the purpose of this Agreement or any applicable Development & Commercialization Agreement with respect to such Program, (b) license or grant to any Third Party, or agree to license or grant to any Third Party, any rights to any Agios Program Assets if such license or grant would fundamentally frustrate the purpose of this Agreement or any applicable Development & Commercialization Agreement with respect to such Program, or (c) disclose any Confidential Information relating to the Agios Program Assets to any Third Party if such disclosure would fundamentally frustrate the purpose of this Agreement with respect to such Program. Agios and/or its Affiliates shall have the right to assign, transfer, convey or dispose of any assets specifically related to such Program to any Affiliate of Agios, to the extent permitted by Section 12.4.

9.4 Disclaimer. Except as otherwise expressly set forth in this Agreement or any executed Development & Commercialization Agreement, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENTS ARE VALID OR ENFORCEABLE, AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A

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