0001193125-17-157874.txt : 20170504 0001193125-17-157874.hdr.sgml : 20170504 20170504115856 ACCESSION NUMBER: 0001193125-17-157874 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 58 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170504 DATE AS OF CHANGE: 20170504 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: 17812673 BUSINESS ADDRESS: STREET 1: 88 SIDNEY STREET CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 617-649-8600 MAIL ADDRESS: STREET 1: 88 SIDNEY STREET CITY: CAMBRIDGE STATE: MA ZIP: 02139 10-Q 1 d368298d10q.htm FORM 10-Q Form 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended March 31, 2017

OR

 

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

Commission file number 001-36014

 

 

AGIOS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   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  ☒    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  ☒    No  ☐

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

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes  ☐    No  ☐

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

Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on May 1, 2017: 48,204,878

 

 

 


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AGIOS PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2017

TABLE OF CONTENTS

 

          Page
No.
 
PART I. FINANCIAL INFORMATION   
Item 1.    Financial Statements (Unaudited)   
   Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016      1  
   Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016      2  
   Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2017 and 2016      3  
   Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016      4  
   Notes to Condensed Consolidated Financial Statements      5  
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      19  
Item 3.    Quantitative and Qualitative Disclosures About Market Risk      30  
Item 4.    Controls and Procedures      30  
PART II. OTHER INFORMATION   
Item 1A.    Risk Factors      31  
Item 6.    Exhibits      58  
   Signatures      59  


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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)

 

     March 31,
2017
    December 31,
2016
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 200,278     $ 160,754  

Marketable securities

     279,480       380,560  

Collaboration receivable – related party

     11,265       4,886  

Tenant improvement and other receivables

     3,452       3,428  

Prepaid expenses and other current assets

     12,391       10,264  
  

 

 

   

 

 

 

Total current assets

     506,866       559,892  

Marketable securities

     23,423       32,250  

Property and equipment, net

     24,139       25,337  

Other non-current assets

     2,888       1,615  
  

 

 

   

 

 

 

Total assets

   $ 557,316     $ 619,094  
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 16,152     $ 17,106  

Accrued expenses

     25,114       32,002  

Deferred revenue – related party

     37,690       35,913  

Deferred rent

     3,473       3,412  
  

 

 

   

 

 

 

Total current liabilities

     82,429       88,433  
  

 

 

   

 

 

 

Deferred revenue, net of current portion – related party

     150,596       154,297  

Deferred rent, net of current portion

     16,911       17,773  

Stockholders’ equity:

    

Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2017 and December 31, 2016

     —         —    

Common stock, $0.001 par value; 125,000,000 shares authorized; 42,382,901 and 42,220,444 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively

     42       42  

Additional paid-in capital

     857,107       842,013  

Accumulated other comprehensive loss

     (212     (313

Accumulated deficit

     (549,557     (483,151
  

 

 

   

 

 

 

Total stockholders’ equity

     307,380       358,591  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 557,316     $ 619,094  
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

     Three Months Ended March 31,  
     2017     2016  

Collaboration revenue – related party

   $ 10,508     $ 31,281  

Operating expenses:

    

Research and development (net of $2,776 and $8,794 of cost reimbursement from related party for the three months ended March 31, 2017 and 2016, respectively)

     62,732       44,038  

General and administrative

     14,823       10,837  
  

 

 

   

 

 

 

Total operating expenses

     77,555       54,875  
  

 

 

   

 

 

 

Loss from operations

     (67,047     (23,594

Interest income

     881       396  
  

 

 

   

 

 

 

Net loss

   $ (66,166   $ (23,198
  

 

 

   

 

 

 

Net loss per share – basic and diluted

   $ (1.56   $ (0.61
  

 

 

   

 

 

 

Weighted-average number of common shares used in computing net loss per share – basic and diluted

     42,280,525       37,864,084  
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  

Net loss

   $ (66,166   $ (23,198

Other comprehensive income:

    

Unrealized gain on available-for-sale securities

     101       407  
  

 

 

   

 

 

 

Comprehensive loss

   $ (66,065   $ (22,791
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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AGIOS PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  

Operating activities

    

Net loss

   $ (66,166   $ (23,198

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation

     1,591       1,246  

Stock-based compensation expense

     10,734       9,107  

Net amortization of premium and discounts on investments

     163       126  

Loss on disposal of fixed assets

     40       —    

Changes in operating assets and liabilities:

    

Collaboration receivable – related party

     (6,379     1,411  

Tenant improvement and other receivables

     (24     2,803  

Prepaid expenses and other current and non-current assets

     (3,425     (857

Accounts payable

     (994     (293

Accrued expenses and other liabilities

     (6,889     (2,902

Deferred revenue – related party

     (1,924     (5,892

Deferred rent

     (801     (560
  

 

 

   

 

 

 

Net cash used in operating activities

     (74,074     (19,009
  

 

 

   

 

 

 

Investing activities

    

Purchases of marketable securities

     (26,740     (211,163

Proceeds from maturities and sales of marketable securities

     136,585       198,868  

Purchases of property and equipment

     (293     (2,533
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     109,552       (14,828
  

 

 

   

 

 

 

Financing activities

    

Payment of public offering costs

     (100     —    

Net proceeds from stock option exercises and employee stock purchase plan

     4,146       1,108  
  

 

 

   

 

 

 

Net cash provided by financing activities

     4,046       1,108  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     39,524       (32,729

Cash and cash equivalents at beginning of the period

     160,754       71,764  
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 200,278     $ 39,035  
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing transactions

    

Additions to property and equipment in accounts payable and accrued expenses

   $ 213     $ 607  
  

 

 

   

 

 

 

Proceeds from stock option exercises in other current assets

   $ 6     $ 17  
  

 

 

   

 

 

 

Public offering costs in other current assets

   $ 329     $ —    
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

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Agios Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Overview and Basis of Presentation

References to Agios

Throughout this Quarterly Report on Form 10-Q, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc.

Overview

We are a biopharmaceutical company committed to the fundamental transformation of patients’ lives through scientific leadership in the field of cellular metabolism, with the goal of making transformative, first- or best-in-class medicines. Our areas of focus are cancer metabolism, rare genetic diseases, or RGDs, which are diseases that are directly caused by changes in genes or chromosomes, often passed from one generation to the next, and metabolic immuno-oncology, or MIO, which is a developing field that aims to modulate the activity of relevant immune cells (or tumor microenvironment) by targeting critical metabolic nodes, thereby, enhancing the immune mediated anti-tumor response. In each of these areas, we are seeking to unlock the biology of cellular metabolism as a platform to create transformative therapies. We are located in Cambridge, Massachusetts.

Basis of presentation

The condensed consolidated balance sheet as of March 31, 2017, and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2017 and 2016, are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2017, and our results of operations and cash flows for the three months ended March 31, 2017 and 2016. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three-month period are also unaudited. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 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 our Annual Report on Form 10-K for the year ended December 31, 2016 that was filed with the Securities and Exchange Commission, or the SEC, on February 16, 2017.

Our consolidated financial statements include our accounts and the accounts of our 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.

Liquidity

In April 2017, we completed a public offering of 5,050,505 shares of common stock at an offering price of $49.50 per share. We received net proceeds from this offering of $235.0 million, after deducting underwriting discounts and commissions paid by us. In addition, we granted the underwriters the right to purchase up to an additional 757,575 shares of common stock, which was also exercised in April 2017, resulting in additional net proceeds to us of $35.2 million, after underwriting discounts and commissions. After giving effect to the full exercise of the over-allotment option, the total number of shares sold by us in the public offering increased to 5,808,080 shares, and net proceeds to us increased to $270.2 million, after underwriting discounts and commissions.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Significant accounting policies

On January 1, 2017, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or 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. The following summarizes the effects of the adoption on our unaudited condensed consolidated financial statements:

Income taxes – Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We did not

 

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recognize any discrete adjustments to income tax expense for the three months ended March 31, 2017, as we are in a full valuation allowance position. We have applied the modified retrospective adoption approach beginning in 2017. This cumulative-effect adjustment related to tax assets that had previously arisen from tax deductions for stock-based compensation expenses that were greater than the compensation recognized for financial reporting. These assets had been excluded from the deferred tax assets and liabilities totals on the balance sheet as a result of certain realization requirements previously included in Accounting Standards Codification, or ASC, 718, Compensation—Stock Compensation. We recorded a cumulative-effect adjustment of approximately $32.7 million through retained earnings and deferred tax assets; however, due to the full valuation allowance, the only impact of the retrospective adoption is footnote presentation which will be presented in the December 31, 2017 year-end financials.

Forfeitures – Upon adoption of ASU 2016-09, entities may also elect to estimate forfeitures and adjust the estimate when it is likely to change, which is consistent with pre-ASU 2016-09 guidance, or account for forfeitures as they occur. Beginning in January 1, 2017, we elected to account for forfeitures as they occur. The ASU is applied on a prospective basis, and prior periods have not been adjusted to reflect this change in accounting policy. The cumulative effect of the change in forfeiture policy in prior periods did not have a material impact of on our statement of operations or balance sheet.

Upon adoption, no other aspects of ASU 2016-09 had a material effect on our unaudited condensed consolidated financial statements or related footnote disclosures.

There have been no other material changes to the significant accounting policies previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016.

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. Subsequently, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligations and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, or collectively, the Revenue ASUs.

The Revenue ASUs provide an accounting standard 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, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We are in process of initiating our overall implementation plan and evaluation of the impact of the new standard on our accounting policies. We will adopt the new standard effective January 1, 2018 under the modified retrospective method. We are in the process of determining the impact of the Revenue ASUs on our financial statements; however, the adoption of the Revenue ASUs may have a material impact on revenue recognition, our notes to consolidated financial statements and our internal controls over financial reporting.

Other Recent Accounting Pronouncements

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, or ASU 2016-16, which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for us for annual periods beginning after December 15, 2017, and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or 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. We are currently in the process of evaluating the impact of the guidance on our 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 our financial statements upon adoption.

 

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3. Fair Value Measurements

We record cash equivalents and marketable securities at fair value. 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 our own assumptions (unobservable inputs). The hierarchy consists of three levels:

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

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

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

The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of March 31, 2017 (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Cash equivalents

   $ 178,663      $ 19,985      $ —        $ 198,648  

Marketable securities:

           

Certificates of deposit

     —          15,990        —          15,990  

U.S. Treasuries

     82,533        —          —          82,533  

Government securities

     12,497        7,493        —          19,990  

Corporate debt securities

     —          184,390        —          184,390  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 273,693      $ 227,858      $ —        $ 501,551  
  

 

 

    

 

 

    

 

 

    

 

 

 

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 our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2017.

There have been no changes to the valuation methods during the three months ended March 31, 2017. We evaluate 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 months ended March 31, 2017. We have no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March 31, 2017.

4. Marketable Securities

Marketable securities at March 31, 2017 and December 31, 2016 consisted of investments in certificates of deposit, U.S. Treasuries, government securities and corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our marketable securities as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities. Marketable securities are recorded at fair value, 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 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 three months ended March 31, 2017 and 2016 and, as a result, we did not reclassify any amounts out of accumulated other comprehensive loss for the periods.

 

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Marketable securities at March 31, 2017 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,240      $ 4      $ (2    $ 11,242  

U.S Treasuries

     82,599        —          (66      82,533  

Government securities

     17,519        —          (22      17,497  

Corporate debt securities

     168,282        —          (74      168,208  

Non-current:

           

Certificates of deposit

     4,760        1        (13      4,748  

Government securities

     2,500        —          (7      2,493  

Corporate debt securities

     16,215        4        (37      16,182  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 303,115      $ 9      $ (221    $ 302,903  
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable securities at December 31, 2016 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,280      $ 2      $ (3    $ 11,279  

U.S. Treasuries

     141,678        2        (62      141,618  

Government securities

     19,533        —          (23      19,510  

Corporate debt securities

     208,285        3        (135      208,153  

Non-current:

           

Certificates of deposit

     7,600        6        (13      7,593  

Government securities

     4,499        —          (21      4,478  

Corporate debt securities

     20,248        —          (69      20,179  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 413,123      $ 13      $ (326    $ 412,810  
  

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2017 and December 31, 2016, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of one to two years, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and therefore classified as available-for-sale.

We review marketable securities for 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 statements of operations if we experienced a credit loss, have the intent to sell the marketable security, or if it is more likely than not that we 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 our investment policy, the severity and the duration of the impairment, and changes in value subsequent to the end of the period.

At March 31, 2017 and December 31, 2016, we held 123 and 158 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 March 31, 2017 and December 31, 2016 was $241.8 million and $335.4 million, respectively. There were no individual securities that were in a significant unrealized loss position as of March 31, 2017 and December 31, 2016. We evaluated our 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 we will be required to sell the securities, and we do 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 March 31, 2017 and December 31, 2016.

5. Celgene Collaboration Agreements

To date, our revenue has primarily been generated from our collaboration agreements with Celgene, or collectively, the Collaboration Agreements. Celgene is a related party through ownership of our common stock. In April 2010, we entered into a collaboration agreement focused on cancer metabolism. The agreement was amended in October 2011 and July 2014, or collectively the agreement together with the amendments, the 2010 Agreement. 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, entered into a

 

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collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the development and commercialization of AG-881 products. On May 17, 2016, we entered into a master research and collaboration agreement, or the 2016 Agreement.

2016 Agreement

In May 2016, we entered into the 2016 Agreement focused on MIO. In addition to new programs identified under the 2016 Agreement, both parties have also agreed that all future development and commercialization of two remaining cancer metabolism programs discovered under the 2010 Agreement, including AG-270, a program focused on methylthioadenosine phosphorylase, or MTAP, deleted cancers, 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, and may be extended 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 the 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. We may conduct further research and pre-clinical and clinical development activities on any continuation program, at our expense, through the completion of an initial phase 1 dose escalation study.

We granted Celgene the right to obtain exclusive options for 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: (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 it does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, the parties 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-commercialization agreement, the two parties 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, the parties 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, the parties 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 in the IO field. 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, we and Celgene will alternate, on a program-by-program basis, being the lead party for the United States, with us having the right to be the lead party for the first such program, and each party will 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.

 

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Financial terms

Under the terms of the 2016 Agreement, we received an initial upfront payment in the amount of $200.0 million. The 2016 Agreement provides specified rights to extend the research term for up to two, or in specified cases, up to four, additional years by paying a $40.0 million per-year extension fee. Celgene will pay an $8.0 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 $30.0 million for any designated development program and at least $35.0 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 $10.0 million.

We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:

 

Program

  

Milestone

   Amount  
65/35 program in IO field    Specified clinical development event      $25.0 million  
65/35 program in IO field    Specified regulatory milestone events      Up to $183.8 million  
50/50 program in IO field    Specified clinical development event      $20.0 million  
50/50 program in IO field    Specified regulatory milestone events      Up to $148.8 million  
I&I field    Specified clinical development event      $25.0 million  
I&I field    Specified regulatory milestone events      Up to $236.3 million  
I&I field    Specified commercial milestone events      Up to $125.0 million  

Additionally, for each licensed program in the I&I field, we are eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any.

Opt-out right

Under the 2016 Agreement, we 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 we will undertake transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at our expense. Further, in lieu of the profit or loss sharing described above, we 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, we 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 the 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 us 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 their 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.

 

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Exclusivity

While any of Celgene’s options remain available under the 2016 Agreement, subject to specified exceptions, we may not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO or 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 we 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, we entered into a letter agreement with Celgene regarding ivosidenib, or the AG-120 Letter Agreement. Under the AG-120 Letter Agreement, the parties agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the isocitrate dehydrogenase 1, or IDH1, target, for which ivosidenib 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 obtained global rights to ivosidenib and the IDH1 program. Neither party will have any further financial obligation, including royalties or milestone payments, to the other concerning ivosidenib or the IDH1 program. Under the terms of the termination, 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 termination does not affect the AG-881 Agreements, which are directed to both the IDH1 target and the isocitrate dehydrogenase 2, or IDH2, target.

AG-881 Agreements

On April 27, 2015, we entered into the AG-881 Agreements. The AG-881 Agreements establish a joint worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, we received an initial upfront payment of $10.0 million in May 2015 and are eligible to receive milestone-based payments described below. The parties will split all worldwide development costs equally, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.

We are 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 a first NDA in a major market and (ii) up to $55.0 million in milestone payments upon achievement of specified regulatory milestone events. We may also receive royalties at tiered, low- to mid-teen percentage rates on net sales if we elect not to participate in the development and commercialization of AG-881.

2010 Agreement

In April 2010, we entered into the 2010 Agreement, which was amended in October 2011 and July 2014. The goal of the collaboration was to discover, develop and commercialize disease-altering therapies in oncology based on our cancer metabolism research platform. We initially led 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.

Upon agreement to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which ivosidenib is the lead development candidate, the sole program remaining under the 2010 Agreement is IDHIFA® (enasidenib), a co-commercialized licensed program for which Celgene leads and funds global development and commercialization activities. We have exercised our right to participate in a portion of commercialization activities in the United States for IDHIFA® (enasidenib) in accordance with the applicable commercialization plan.

Under the remaining terms of the 2010 Agreement, we are eligible to receive up to $95.0 million in potential milestone payments for the IDHIFA® (enasidenib) program. The potential milestone payments are comprised of: (i) up to $70.0 million in milestone payments upon achievement of specified ex-U.S. regulatory milestone events and (ii) a $25.0 million milestone payment upon achievement of a specified commercial milestone event.

Under the 2010 Agreement, we may also receive royalties at tiered, low-double digit to mid-teen percentage rates on net sales and have the option to participate in the development and commercialization of certain products in the United States. Assuming all other revenue recognition criteria are met, royalty payments will be recognized as revenue in the period in which they are earned. To date, we have not earned any royalty payments under the 2010 Agreement.

 

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Unless terminated earlier by either party, the term of the 2010 Agreement will continue until the expiration of all royalty terms with respect to IDHIFA® (enasidenib). Celgene may terminate this agreement for convenience in its entirety upon ninety days written notice to us. 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. Either party may terminate the agreement in the event of specified insolvency events involving the other party.

Accounting analysis and revenue recognition – collaboration revenue

April 2015 – May 2016

The AG-881 Agreements 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, under the provisions of ASC 605-25, Multiple Element Arrangements, we identified the remaining deliverables under the 2010 Agreement and the AG-881 Agreements, and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 our best estimate of selling price for each unit of accounting. The undelivered items, which are each considered by us 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: We 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. Our 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. We developed a best estimate of selling price of the licenses of $33.2 million. We recognize 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 three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.9 million as collaboration revenue.

 

    Four separate on-going development services for which we determined we are acting as the principal of all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all four of the on-going development services of $12.7 million using our 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 our 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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, Revenue Recognition – Principal Agent Considerations, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. During the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $1.0 million as collaboration revenue.

 

    Four separate on-going development services for which we determined we are not acting as the principal of all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all four of the on-going development services of $97.3 million using our 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 our 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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, we determined we are not the principal of all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. During the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $4.8 million as a reduction of research and development costs related to these services.

 

   

On-going research and development: We developed the best estimate of selling price of the research and development services of $30.5 million using our management’s best estimate of the cost of obtaining these services at arm’s length

 

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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. For the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $3.6 million as collaboration revenue.

 

    Committee participations under the 2010 Agreement and AG-881 Agreements: We developed the best estimate of selling price of the committee participation services of $0.8 million using our 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 three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.1 million as collaboration revenue.

As a result of Celgene assuming the primary development responsibilities for IDHIFA® (enasidenib) in the first quarter of 2015, we recorded $0.5 million of third-party costs incurred on behalf of Celgene during the three months ended March 31, 2016 as a reduction of research and development costs.

Beginning in the third quarter of 2015, we initiated a phase 1b frontline combination clinical trial of IDHIFA® (enasidenib) and ivosidenib for which we 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, we determined that we are the principal for the efforts related to the IDHIFA® (enasidenib) arm of the combination trial but are the agent for the efforts related to the ivosidenib arm of the combination trial. Accordingly, consideration earned related to the IDHIFA® (enasidenib) arm of the combination trial is recognized as collaboration revenue in the period earned, and consideration earned related to the ivosidenib arm of the combination trial is reported as a reduction of research and development expense in the period earned. During the three months ended March 31, 2016, we recognized $0.7 million in collaboration revenue and $0.2 million as a reduction of research and development costs related to the combination trial.

During the three months ended March 31, 2016, we incurred an additional $3.3 million in reimbursable development expenses related to the ivosidenib 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 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, we identified the undelivered elements under the Collaboration Agreements and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 Collaboration Agreements that were deemed to be determinable at the modification date, to each unit of accounting relative to its best estimate of selling price. During the three months ended March 31, 2017, we received $8.0 million from Celgene upon the designation of AG-270, our program focused on MTAP-deleted cancers, as a development candidate. This payment is contingent consideration and is allocated to each unit of accounting, discussed below, relative to its best estimate of selling price. The undelivered items, which are each considered by us 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 we determined we are acting as the principal for all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all three of the development services of $67.8 million using our 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 our 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. We expect the services to be performed through 2019. When considering the factors included within ASC 605-45, we determined we are the principal for all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March 31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $3.7 million as collaboration revenue.

 

   

Three separate on-going development services for which we determined we are not acting as the principal for all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all three development services of $22.4 million using our 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 our 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. We expect the services to be performed through 2019. When

 

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considering the factors included within ASC 605-45, we determined we are not the principal for all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. For the three months ended March 31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $2.8 million as a reduction of research and development costs related to these services.

 

    On-going research and development: We developed the best estimate of selling price of the research and development services of $207.0 million using our 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 three months ended March 31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of $6.6 million as collaboration revenue.

 

    Committee participations under the 2010 Agreement, AG-881 Agreements and 2016 Agreement: We developed the best estimate of selling price of the committee participation services of $1.5 million using our 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 three months ended March 31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of less than $0.1 million as collaboration revenue.

 

    Additional development activities for which we determined we are acting as the principal of all development activities: We developed the best estimate of selling price of the development service of $48.7 million using our 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 our 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, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March 31, 2017, we did not recognize any revenue associated with this unit of account.

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 we perform certain services for which we are 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 we receive less reimbursement than initially estimated.

During the three months ended March 31, 2017 and 2016, we recognized a total of $10.5 million and $31.3 million, respectively, as collaboration revenue and recognized $2.8 million and $8.8 million, respectively, as a reduction of research and development expenses. As of March 31, 2017 and December 31, 2016, we recorded a collaboration receivable of $11.3 million and $4.9 million, respectively, related to reimbursable development costs.

In determining the current and noncurrent classification of deferred revenue, we consider 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.

Accounting analysis and revenue recognition – milestone revenue

We concluded that certain milestone payments that may be received under the Collaboration Agreements are substantive. Factors considered in the evaluation of the milestones included an assessment of whether: (i) the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) the consideration relates solely to past performance, and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the Collaboration Agreements. Revenue from substantive milestones is recognized as revenue in its entirety upon successful accomplishment of the milestones, assuming all other revenue recognition criteria are met. Milestones not deemed substantive, are allocated to each unit of accounting, discussed above, relative to our best estimate of selling price for each unit of accounting and recognized on a proportional performance basis or ratably over the expected period of performance.

In January 2016, a substantive clinical development milestone related to the IDHIFA® (enasidenib) program under the 2010 Agreement was achieved and we 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 three months ended March 31, 2017 and 2016. The next potential milestones expected to be achieved under the Collaboration Agreements relate to specified ex-U.S. regulatory events. Achievement of these events will result in milestone payments of up to $70.0 million. Additionally, the next potential payment we expect to receive under the Collaboration Agreements is related to Celgene’s exercise of its option to develop and commercialize AG-270, the program focused on MTAP-deleted cancers. This exercise will result in a license fee of at least $30.0 million.

 

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6. Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

     March 31,
2017
     December 31,
2016
 

Accrued compensation

   $ 5,285      $ 11,092  

Accrued research and development costs

     13,474        20,266  

Accrued professional fees

     5,060        476  

Accrued other

     1,295        168  
  

 

 

    

 

 

 

Total

   $ 25,114      $ 32,002  
  

 

 

    

 

 

 

7. Share-Based Payments

2013 Stock Incentive Plan

In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our Initial Public Offering, or IPO, and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based stock awards, or PSUs, and other stock-based awards. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of March 31, 2017, the total number of shares reserved under the 2007 Plan and the 2013 Plan are 7,802,377, and we had 1,345,120 shares available for future issuance under such plans.

The following table summarizes all stock option activity for three months ended March 31, 2017:

 

     Number of
Stock Options
     Weighted-
Average
Exercise
Price
 

Outstanding at December 31, 2016

     5,218,880      $ 46.79  

Granted

     1,129,352        49.85  

Exercised

     (142,539      21.56  

Forfeited/expired

     (75,899      66.24  
  

 

 

    

 

 

 

Outstanding at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 

Exercisable at March 31, 2017

     2,909,093      $ 37.76  
  

 

 

    

 

 

 

Vested and expected to vest at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 

At March 31, 2017, the total unrecognized compensation expense related to unvested stock option awards was $104.5 million, which we expect to recognize over a weighted-average period of approximately 2.68 years.

Restricted stock units

We may grant awards of RSUs to non-employee directors 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 our common stock.

The following table presents RSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     77,050      $ 49.60  

Granted

     57,100        50.40  

Vested

     —          —    

Forfeited/expired

     (7,300      39.76  
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     126,850      $ 50.52  
  

 

 

    

 

 

 

 

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As of March 31, 2017, there was approximately $4.2 million of total unrecognized compensation expense related to RSUs, which we expect to be recognized over a weighted-average period of 1.5 years.

Performance-based stock options

During the three months ended March 31, 2017 and 2016, 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 us. However, certain performance-based stock options issued in prior periods were still outstanding as of March 31, 2017. Performance-based vesting criteria for options primarily relate to milestone events specific to our corporate goals, including but not limited to certain preclinical, clinical and regulatory development milestones related to our 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 our management’s best estimates. As of March 31, 2017, all performance-based milestones had been achieved.

Performance-based stock units

We may grant awards of PSUs to non-employee directors and employees on a discretionary basis pursuant to the 2013 Plan. Each PSU entitles the holder to receive, at the achievement of the performance-based and service-based criteria, a specified number of shares of our stock. Performance-based vesting criteria primarily relate to milestone events specific to our corporate goals, specifically regulatory development milestones related to our product candidates.

The following table presents PSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     200,613      $ 53.36  

Granted

     —          —    

Vested

     —          —    

Forfeited/expired

     —          —    
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     200,613      $ 53.36  
  

 

 

    

 

 

 

Stock-based compensation expense associated with these PSUs is recognized if the performance condition is considered probable of achievement using our management’s best estimates. As of March 31, 2017, there was approximately $10.7 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are not considered probable of achievement.

2013 Employee Stock Purchase Plan

In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. The 2013 ESPP is administered by our Board of Directors or by a committee appointed by our 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 our common stock at the beginning or end of the offering period, whichever is lower, subject to Internal Revenue Service limits. We issued 33,521 shares and 12,327 shares during the three months ended March 31, 2017 and 2016, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 327,272 shares of our common stock. As of March 31, 2017, we had 239,921 shares available for future issuance under the 2013 ESPP.

 

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Stock-based compensation expense

During the three months ended March 31, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):

 

     Three Months Ended March 31,  
     2017      2016  

Stock options

   $ 9,902      $ 8,564  

Restricted stock units

     595        359  

Performance-based stock options

     —          46  

Employee Stock Purchase Plan

     237        138  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 

Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):

 

    

Three Months Ended

March 31,

 
     2017      2016  

Research and development expense

   $ 7,025      $ 5,528  

General and administrative expense

     3,709        3,579  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 

8. Income Taxes

There was no (benefit) provision for income taxes during the three months ended March 31, 2017 and 2016.

We account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. We evaluated whether any uncertain tax positions arise from commencing operations of our wholly owned subsidiary, Agios International Sarl, and determined no uncertain tax positions existed. As of March 31, 2017 and December 31, 2016, we did not have any uncertain tax positions recorded.

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, RSUs, unvested restricted stock and ESPP options are considered to be common stock equivalents. Furthermore, performance-based stock units with vesting conditions that were not met as of March 31, 2017 are excluded as common stock equivalents.

Since we had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share was 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 Months Ended March 31,  
     2017      2016  

Stock options

     6,129,794        5,318,350  

Restricted stock units

     126,850        73,800  

Employee stock purchase plan options

     5,533        4,227  
  

 

 

    

 

 

 
     6,262,177        5,396,377  
  

 

 

    

 

 

 

10. Subsequent Events

On April 27, 2017, we entered into a global license agreement with Aurigene Discovery Technologies Limited, or Aurigene, to research, develop and commercialize small molecule inhibitors of an undisclosed cancer metabolism target, or the Aurigene

 

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Agreement. Under the terms of the Aurigene Agreement, Aurigene will provide us with exclusive rights to its portfolio of novel small molecules for the undisclosed target, and we will provide Aurigene a $3.0 million upfront payment and potential future milestone payments up to $17.0 million per licensed product if we achieve certain development and regulatory milestones. Aurigene is also eligible to receive low single-digit royalties on product sales. We will conduct preclinical studies and, if successful, fund further global research and development, as well as regulatory and commercial activities.

 

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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 financial statements as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 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, 2016 filed with the Securities and Exchange Commission, or SEC, on February 16, 2017. 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 the fundamental transformation of patients’ lives through scientific leadership in the field of cellular metabolism, with the goal of making transformative, first- or best-in-class medicines. Our areas of focus are cancer metabolism, rare genetic diseases, or RGDs, which are diseases that are directly caused by changes in genes or chromosomes, often passed from one generation to the next, and metabolic immuno-oncology, or MIO, which is a developing field that aims to modulate the activity of relevant immune cells (or tumor microenvironment) by targeting critical metabolic nodes, thereby, enhancing the immune mediated anti-tumor response. In each of these areas, we are seeking to unlock the biology of cellular metabolism as a platform to create transformative therapies.

Our most advanced cancer product candidates are IDHIFA® (enasidenib) and ivosidenib, which target mutated isocitrate dehydrogenase 2, or IDH2, and 1, or IDH1, respectively, and AG-881, which targets both mutated IDH1 and mutated IDH2. These mutations are found in a wide range of cancers.

The lead product candidate in our RGD program, AG-348, targets pyruvate kinase-R for the treatment of pyruvate kinase, or PK, deficiency. PK deficiency is a rare genetic disorder that often results in severe hemolytic anemia, jaundice and lifelong conditions associated with chronic anemia, and secondary complications due to inherited mutations in the pyruvate kinase enzyme within red blood cells.

2016 Agreement

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 focuses on the discovery and development of cancer programs in the field of MIO. In addition to new programs identified under the 2016 Agreement, both parties have also agreed that all future development and commercialization of two remaining cancer metabolism programs discovered under the 2010 discovery and development collaboration and license agreement with Celgene, or the 2010 Agreement, including AG-270, a program focused on methylthioadenosine phosphorylase, or MTAP, deleted cancers, 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, and may be extended for up to two or, in specified cases, up to four additional one-year terms by paying us a $40.0 million per year extension fee.

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 the completion of an initial phase 1 dose escalation study.

 

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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. 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 granted Celgene the right to obtain exclusive options for 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 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 does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, the parties 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-commercialization agreement, the two parties 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, the parties 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.

AG-120 Letter Agreement

Also in May 2016, the parties agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which ivosidenib 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 obtained global rights to ivosidenib and the IDH1 program. Neither party will have any further financial obligation, including royalties or milestone payments, to the other concerning ivosidenib or the IDH1 program. Under the terms of the termination, 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 termination does not affect the AG-881 Agreements, which are directed at both the IDH1 target and the IDH2 target, and discussed in further detail below.

AG-881 Agreements

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, entered into a collaboration and license agreement with Celgene International II Sarl. Both of these agreements are collectively referred to as the AG-881 Agreements. The AG-881 Agreements establish a joint worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, we received an initial upfront payment of $10.0 million in May 2015 and are eligible to receive up to $70.0 million in milestone-based payments. The parties will split all worldwide development costs equally subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.

2010 Agreement

In April 2010, we entered into the 2010 Agreement, with a focus on targeting cancer metabolism. The goal of the collaboration was to discover, develop and commercialize disease-altering therapies in oncology based on our cancer metabolism research platform. We initially led 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.

Upon agreement to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which ivosidenib is the lead development candidate, the sole program remaining under the 2010 Agreement is IDHIFA® (enasidenib), a co-commercialized licensed program for which Celgene leads and funds global development and commercialization activities. We have exercised our right to participate in a portion of commercialization activities in the United States for IDHIFA® (enasidenib) in accordance with the applicable commercialization plan. We are eligible to receive up to $95.0 million in milestone-based payments as well as royalties on any sales on IDHIFA® (enasidenib).

 

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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.

Additionally, since inception, we have incurred significant operating losses. Our net losses were $66.2 million and $23.2 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, we had an accumulated deficit of $549.6 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, IDHIFA® (enasidenib), ivosidenib, AG-881 and AG-348; 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 March 31, 2017, we have not generated any revenue from product sales. Substantially all of our revenue to date has been derived from our collaborations. In the future, we expect to generate revenue from a combination of product sales, 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, or FASB, Accounting Standards Codification, or 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, and 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 trials and regulatory approvals, and the estimated patient populations.

Reimbursement of research and development costs under our collaboration agreements are 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 it is considered a substantive milestone, 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: (i) the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

 

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Revenue from milestones, if they are nonrefundable and deemed substantive, are recognized upon achievement of the milestones. We recognize revenue associated with 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 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, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and commercialize these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from IDHIFA® (enasidenib), ivosidenib, AG-881, AG-348 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 investigational new drug application, or IND, and/or new drug application, or NDA, enabling toxicology and clinical studies;

 

    the successful enrollment in, and completion of, clinical trials;

 

    the receipt of marketing approvals from applicable regulatory authorities;

 

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

 

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

 

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

 

    maintaining an acceptable safety profile of the products following approval.

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

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

 

    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 under our collaboration agreements for certain 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.

IDHIFA® (enasidenib)

IDHIFA® (enasidenib) 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. Celgene maintains worldwide development and commercial rights to IDHIFA® (enasidenib) and will fund the future development and commercialization costs related to this program. Under the 2010 Agreement, Celgene is responsible for all development costs for IDHIFA® (enasidenib), and we are eligible to receive up to $95.0 million in milestone payments and a tiered royalty on any net sales of products containing IDHIFA® (enasidenib). In January 2016, we earned a $25.0 million milestone payment upon initiation of the IDHENTIFY clinical trial, as described below. In addition to contributing our scientific and translational expertise, we will continue to conduct some clinical development and regulatory activities within the IDHIFA® (enasidenib) development program under the 2010 Agreement. We also have co-commercialization rights to provide up to one-third of the commercialization efforts and will be reimbursed for those efforts.

 

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In June 2014, the U.S. Food and Drug Administration, or FDA, granted us orphan drug designation for IDHIFA® (enasidenib) for treatment of patients with AML, and in August 2014, we announced that the FDA granted fast track designation to IDHIFA® (enasidenib) 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 IDHIFA® (enasidenib) for the treatment of AML. We continue to evaluate IDHIFA® (enasidenib) in clinical trials evaluating hematological cancers with IDH2 mutations, which are led and funded by Celgene. In December 2016, Celgene submitted an NDA to the FDA for IDHIFA® (enasidenib) in relapsed and/or refractory AML, or R/R AML. This NDA, which is based on data from the ongoing phase 1/2 study of IDHIFA® (enasidenib) in patients with advanced hematologic malignancies with an IDH2 mutation, was accepted by the FDA in March 2017, with priority review and a Prescription Drug User Fee Act, or PDUFA, action date of August 30, 2017. To date, all clinical data reported by us and our collaborators 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.

We and Celgene are evaluating IDHIFA® (enasidenib) in the following clinical trials:

Phase 1/2 clinical trial

IDHIFA® (enasidenib) is being evaluated in a phase 1/2 multicenter, open-label, clinical trial to assess the safety, clinical activity, and tolerability of IDHIFA® (enasidenib) in patients with advanced hematologic malignancies with an IDH2 mutation.

In December 2015, we reported clinical data, as of September 1, 2015, from the dose escalation phase and expansion cohorts of this trial, which included 209 response-evaluable enrolled patients with IDH2 mutant-positive AML. The data were presented at the 2015 American Society of Hematology Annual Meeting and Exposition in Orlando, Florida, or ASH 2015. IDHIFA® (enasidenib) 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.

Together with Celgene, we presented clinical data from a subset of patients with myelodysplastic syndromes, or MDS, from the dose-escalation and expansion portions of this trial at the 2016 American Society of Hematology Annual Meeting and Exposition in San Diego, California, or ASH 2016, in December 2016.

Phase 1b frontline combination trial (ivosidenib also being evaluated)

IDHIFA® (enasidenib) is being evaluated in a phase 1b, multicenter, international, open-label clinical trial to evaluate the safety and clinical activity of IDHIFA® (enasidenib) or ivosidenib in combination with induction and consolidation therapy in patients with newly diagnosed AML with an IDH2 or IDH1 mutation who are eligible for intensive chemotherapy. The trial is currently enrolling patients.

Phase 1/2 frontline combination trial (ivosidenib also being evaluated)

IDHIFA® (enasidenib) is being evaluated in a phase 1/2 frontline combination clinical trial, conducted by Celgene, of either IDHIFA® (enasidenib) or ivosidenib 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. The trial has completed the phase 1 component and is currently enrolling in the phase 2 component.

IDHENTIFY

IDHIFA® (enasidenib) is being evaluated in IDHENTIFY, an international phase 3, multi-center, open-label, randomized clinical trial designed to compare the efficacy and safety of IDHIFA® (enasidenib) 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 January 2016, in conjunction with the initiation of the IDHENTIFY clinical trial, we received a milestone payment of $25.0 million from Celgene pursuant to the 2010 Agreement. The trial is currently enrolling patients.

 

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Ivosidenib

Ivosidenib 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. We hold worldwide development and commercial rights to ivosidenib and will fund the future development and commercialization costs related to this program. Mutations in IDH1 have been identified in difficult to treat hematologic and solid tumor cancers, including AML, chondrosarcoma, cholangiocarcinoma, and glioma, where both the treatment options and prognosis for patients are poor. On May 18, 2015, we announced that the FDA granted fast track designation to ivosidenib for treatment of patients with AML that harbor an IDH1 mutation. On June 10, 2015, the FDA granted us orphan drug designation for ivosidenib for treatment of patients with AML. In November 2016, the FDA granted fast track designation to ivosidenib for treatment of patients with previously treated, unresectable or metastatic cholangiocarcinoma with an IDH1 mutation. In January 2017, we announced that we intend to submit an NDA to the FDA for ivosidenib in R/R AML by the end of 2017. On April 26, 2017, the FDA granted orphan drug designation for ivosidenib for the treatment of cholangiocarcinoma.

We are evaluating ivosidenib in the following clinical trials:

Phase 1 clinical trial (advanced hematologic malignancies)

Ivosidenib is being evaluated in a phase 1 multicenter, open-label, dose-escalation and expansion clinical trial, designed to assess its safety, clinical activity and tolerability as a single agent in patients with advanced hematologic malignancies with an IDH1 mutation. Four expansion cohorts have been added to the trial.

In December 2016, we presented clinical data from 78 patients treated with ivosidenib in the completed dose escalation portion of the ongoing phase 1 study of ivosidenib in advanced hematologic malignancies at ASH 2016. This is the first demonstration that treatment with single agent ivosidenib can result in mutant IDH1 clearance, or IDH1-MC. We are continuing to study the potential relationship between IDH1-MC and clinical benefit for patients with AML.

Phase 1b frontline combination trial

As discussed above, ivosidenib and IDHIFA® (enasidenib) are also being evaluated in a phase 1b, multicenter, international, open-label clinical trial in combination with induction and consolidation therapy. The trial is currently enrolling patients.

Phase 1/2 frontline combination trial

As discussed above, ivosidenib and IDHIFA® (enasidenib) are also being evaluated in a phase 1/2 frontline clinical trial in combination with VIDAZA®. The trial has completed the phase 1 component and is currently enrolling in the phase 2 component.

AGILE

In the first half of 2017, we intend to initiate AGILE, a global, registration-enabling phase 3 clinical trial combining ivosidenib and VIDAZA® in newly diagnosed AML patients with an IDH1 mutation who are ineligible for intensive chemotherapy.

Phase 1 clinical trial (advanced solid tumors)

Ivosidenib is being evaluated in a phase 1 multicenter, open-label, dose-escalation and expansion clinical trial, designed to assess its safety, clinical activity and tolerability as a single agent in patients with advanced solid tumors with an IDH1 mutation, including glioma, intrahepatic cholangiocarcinoma, or IHCC, and chondrosarcomas.

In November 2015, we reported clinical data from the dose-escalation portion of our ongoing phase 1 clinical trial evaluating ivosidenib in patients with IDH1 mutant-positive advanced solid tumors who received ivosidenib 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.

In November 2016, we reported initial data from the dose expansion cohort of our ongoing phase 1 clinical trial evaluating ivosidenib in patients with IDH1 mutant-positive glioma at the Society for Neuro-Oncology Annual Meeting in Scottsdale, Arizona, and initial data from the dose expansion cohort of our ongoing phase 1 clinical trial evaluating ivosidenib in patients with IDH1 mutant-positive chondrosarcoma at the annual meeting of the Connective Tissue Oncology Society, or CTOS, in Lisbon, Portugal.

ClarIDHy

Ivosidenib is being evaluated in ClarIDHy, a registration-enabling phase 3, multicenter, randomized, double-blind, placebo-controlled clinical trial of ivosidenib in previously-treated patients with nonresectable or metastatic cholangiocarcinoma with an IDH1 mutation. The trial was initiated in December of 2016. The trial is currently enrolling patients.

 

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AG-881: brain penetrant 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. Given the clinical data generated with IDHIFA® (enasidenib) and ivosedenib in AML, AG-881 will remain a back-up molecule in hematologic malignancies, and we are focusing our development efforts for AG-881 in glioma.

We and Celgene are jointly collaborating on a worldwide development program for AG-881, 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. Under the AG-881 Agreements, we are eligible to receive up to $70.0 million in potential milestone payments related to AG-881. We may also receive royalties at tiered, low- to mid-teen percentage rates on net sales if we elect to not participate in the development and commercialization of AG-881.

We are conducting two 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.

The phase 1 trial in patients with advanced IDH1 or IDH2 mutant-positive hematologic malignancies has completed its dose escalation portion, establishing proof of mechanism as measured by reductions in 2HG levels, and is now closed for enrollment. No maximum tolerable dose, or MTD, was reached. In the phase 1 trial in IDH1 or IDH2 mutant-positive advanced solid tumors, an MTD was established and additional patients are now being enrolled for additional safety, pharmacokinetics and pharmacodynamics analyses.

AG-348: PKR activator

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 adenosine triphosphate, or ATP, levels and a decrease in 2,3-diphosphoglycerate, or 2-3-DPG, levels in blood sampled from patients with PK deficiency and treated ex-vivo with AG-348. 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. We have worldwide development and commercial rights to AG-348 and expect to fund the future development and commercialization costs related to this program. On March 24, 2015, the FDA granted us orphan drug designation for AG-348 for treatment of patients with PK deficiency. In December 2016, we announced our decision to advance AG-348 into pivotal development as the first potential disease-modifying treatment for PK deficiency. On April 27, 2017, the FDA granted fast track designation to AG-348 for the treatment of patients with PK deficiency.

DRIVE-PK

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.

In June 2016, we reported the first clinical data from DRIVE PK at the 21st Congress of the European Hematology Association in Copenhagen, Denmark, establishing proof of concept for AG-348 as a novel, first-in-class, oral activator of both wild-type and mutated PKR enzymes.

In December 2016, we reported updated data from DRIVE PK at ASH 2016. At the time of the data presentation, the target enrollment for DRIVE PK had been reached with a total of 52 patients enrolled.

AG-519

AG-519 is an orally available small molecule and a potent activator of the PKR enzyme, with comparable biochemical, cellular and in-vivo activity to AG-348, and was developed as our second PKR activator. We were evaluating AG-519 in a placebo-controlled phase 1 integrated single ascending dose and multiple ascending dose clinical trial in healthy volunteers. In December 2016, we announced that we are no longer developing AG-519, and withdrew our IND for AG-519, following a verbal notification of a clinical hold from the FDA.

 

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AG-270: Targeting MTAP-deleted cancers

MTAP is a metabolic enzyme that is deleted in approximately 15 percent of all cancers. This deletion is readily detected by a simple genomic or immunohistochemistry test, thus allowing the selection of patients predicted to be sensitive to the therapy. We have discovered a novel pathway comprised of multiple targets with a shared vulnerability in MTAP-deleted tumors and have demonstrated that this pathway can be modulated by small molecule inhibitors, resulting in robust anti-tumor activity in animal models.

In March 2017, we announced that Celgene designated the development candidate focused on MTAP-deleted cancers as a development candidate under the 2016 Agreement. Pursuant to the 2016 Agreement, Celgene paid us an $8 million designation fee for the MTAP program, known as AG-270. Exploratory research, drug discovery and early development of AG-270 is led by us, and Celgene will have an opt-in right on AG-270 up through phase 1 dose escalation for at least a $30.0 million fee. Upon opt-in, we and Celgene will have global co-development and co-commercialization rights with a worldwide 50/50 cost and profit share on AG-270, and we will be eligible for up to $168.8 million in clinical and regulatory milestone payments. We expect to submit an IND for AG-270 by the end of 2017.

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.

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. We have 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, 2016.

Results of Operations

Comparison of three months ended March 31, 2017 and 2016

The following table summarizes our results of operations for the three months ended March 31, 2017 and 2016:

 

     Three Months Ended
March 31,
               

($ in thousands)

   2017      2016      $ Change      % Change  

Collaboration revenue – related party

   $ 10,508      $ 31,281      $ (20,773      -66

Operating expenses:

           

Research and development (net of $2,776 and $8,794 of cost reimbursement from related party for the three months ended March 31, 2017 and 2016, respectively)

     62,732        44,038        18,694        42  

General and administrative

     14,823        10,837        3,986        37  
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss from operations

     (67,047      (23,594      (43,453      184  

Interest income

     881        396        485        122  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (66,166    $ (23,198    $ (42,968      185
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Revenue. For the three months ended March 31, 2017, we recognized $10.5 million in revenue, which includes partial recognition of the development candidate designation payment for AG-270, our program focused on MTAP-deleted cancers, of $1.5 million.

For the three months ended March 31, 2016, we recognized $31.3 million in revenue, which includes a $25.0 million milestone payment related to the initiation of the Phase 3 IDHENTIFY trial with IDHIFA® (enasidenib) under the 2010 Agreement.

Research and Development Expense. The increase in research and development expenses was primarily attributable to net increases of $7.2 million in external services and $11.5 million in internal expenses; both of these increases are inclusive of cost reimbursements recorded as a reduction of research and development expenses.

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

 

     Three Months Ended
March 31,
               

($ in thousands)

   2017      2016      $ Change      % Change  

IDH2 inhibitor (IDHIFA® (enasidenib))

   $ 1,580      $ 2,733      $ (1,153      -42

IDHIFA® (enasidenib) reduction of R&D expenses

     (14      (535      521        -97  

IDH1 inhibitor (ivosidenib)

     30,778        19,718        11,060        56  

Ivosidenib reduction of R&D expenses (1)

     —          (6,591      6,591        -100  

Pan-IDH inhibitor (AG-881)

     5,586        4,670        916        20  

AG-881 reduction of R&D expenses

     (2,762      (1,668      (1,094      66  

PKR activator (AG-348)

     7,469        5,092        2,377        47  

MTAP-deleted cancers program (AG-270)

     4,549        3,613        936        26  

PKR activator (AG-519)

     1,953        4,805        (2,852      -59  

Other research and platform programs

     13,593        12,201        1,392        11  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expenses, net

   $ 62,732      $ 44,038      $ 18,694        42
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 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 ivosidenib is the lead development candidate. As a result of the termination, we obtained global development and commercial rights to ivosidenib and the IDH1 program and expect to fund all the future development and commercialization costs related to the program. For the three months ended March 31, 2016, we recognized a reduction in R&D expenses of $6.6 million for ivosidenib related to the 2010 agreement. As a result of the termination of the agreement, we did not recognize a reduction in R&D expenses for the three months ended March 31, 2017 and do not expect to recognize reductions in the future.

The change in research and development expense depicted in the table above were primarily attributable to the following:

 

    IDHIFA® (enasidenib) costs decreased as a result of less internal and external expenses related to ongoing translational work on clinical and preclinical biomarkers.

R&D costs reimbursed for IDHIFA® (enasidenib) decreased as a result of Celgene assuming the primary development responsibilities for IDHIFA® (enasidenib) in the first quarter of 2015. The cost reimbursements are only representative of third-party cost reimbursements.

 

    Ivosidenib costs increased as a result of: (i) start-up costs for the AGILE clinical trial; (ii) initiation of the ClarIDHy clinical trial; (iii) the ongoing enrollment in the expansion portion of the phase 1 clinical trial evaluating single agent ivosidenib in patients with IDH1 mutant-positive advanced hematologic malignancies; and (iv) research and development activities, including manufacturing-related activities, needed to prepare for a potential NDA submission in 2017.

R&D costs reimbursed for ivosidenib decreased as a result of our obtaining global development and commercial rights to ivosidenib and the IDH1 program and the responsibility for funding all of the costs related to the program, upon terminating the 2010 Agreement with respect to the program effective August 15, 2016.

 

    AG-881 costs increased as a result of the internal and external expenses related to on-going work on two phase 1 multi-center, open-label clinical trials, 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.

 

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As AG-881 development services progress, the R&D costs reimbursed for AG-881 will also increase.

 

    AG-348 costs increased as a result of the selection of AG-348 instead of AG-519, which occurred in Q4 2016.

 

    AG-270 activities have increased as we prepare for a potential IND filing in 2017.

 

    AG-519 costs decreased as a result of the selection of AG-348 instead of AG-519, which occurred in Q4 2016.

 

    The increase in the costs of 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.

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

 

    An increase of $1.1 million in personnel costs related to an increase in our internal headcount of 32%; and

 

    An increase of $2.9 million related to support our growing commercial organization.

Interest Income. The increase in interest income is attributable to higher investment balances driven by upfront fees received under our 2016 Agreement, funds received from our September 2016 financing and a more diversified investment portfolio, resulting in higher interest earned on investments.

Liquidity and Capital Resources

Sources of liquidity

Since our inception, and through March 31, 2017, we have funded our operations through upfront, milestone, extension and cost reimbursement payments related to our collaboration agreements, proceeds received from our issuance of preferred stock, our IPO and follow-on public offerings, including a private placement of common stock to an affiliate of Celgene, which was completed concurrently with our IPO.

In April 2017, we completed a public offering of 5,050,505 shares of common stock at an offering price of $49.50 per share. We received net proceeds from this offering of $235.0 million, after deducting underwriting discounts and commissions paid by us. In addition, we granted the underwriters the right to purchase up to an additional 757,575 shares of common stock, which was also exercised in April 2017, resulting in additional net proceeds to us of $35.2 million, after underwriting discounts and commissions. After giving effect to the full exercise of the over-allotment option, the total number of shares sold by us in the public offering increased to 5,808,080 shares and net proceeds to us increased to $270.2 million, after underwriting discounts and commissions.

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 and extension fees, and we 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 with Celgene is our only committed potential external source of funds.

Cash flows

The following table provides information regarding our cash flows for the three months ended March 31, 2017 and 2016:

 

     Three Months Ended
March 31,
 

(in thousands)

   2017      2016  

Net cash used in operating activities

   $ (74,074    $ (19,009

Net cash provided by (used in) investing activities

     109,552        (14,828

Net cash provided by financing activities

     4,046        1,108  
  

 

 

    

 

 

 

Net change in cash and cash equivalents

   $ 39,524      $ (32,729
  

 

 

    

 

 

 

Net cash used in operating activities. During the three months ended March 31, 2017, we received $5.0 million in cost reimbursements related to our collaboration agreements with Celgene. These amounts were offset by increased operating expenses which relate to increases in clinical study costs due to advancements in our most advanced product candidates, expanded facilities and increased staffing needs due to our expanding operations.

 

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During the three months ended March 31, 2016, we received $35.1 million related to our collaboration agreements, including a $25.0 million milestone payment upon the initiation of the IDHENTIFY phase 3 study of IDHIFA® (enasidenib), and $2.8 million as reimbursement of tenant improvements.

Net cash provided by (used in) investing activities. The cash provided by investing activities for the three months ended March 31, 2017 was primarily the result of higher proceeds from maturities and sales of marketable securities in comparison to purchases of marketable securities.

The cash used in investing activities for the three months ended March 31, 2016 was primarily the result of lower proceeds from maturities and sales of marketable securities in comparison to purchases of marketable securities. In addition, we incurred $2.5 million in purchases of property and equipment.

Net cash provided by financing activities. The cash provided by financing activities for the three months ended March 31, 2017 and 2016 was the result of proceeds received from stock option exercises and 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.

We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2017, together with anticipated interest income, anticipated expense reimbursements under our collaboration agreements, but excluding any additional program-specific milestone payments, and the proceeds from our April 2017 underwritten public stock offering will enable us to fund our operating expenses and capital expenditure requirements through at least the end of 2019. 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;

 

    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 associated with preparation for the potential commercial launch of one or more 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.

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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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

 

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Contractual obligations

We have 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.

During the three months ended March 31, 2017, there were no 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, 2016.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. As of March 31, 2017 and December 31, 2016, we had cash, cash equivalents and marketable securities of $503.2 million and $573.6 million, respectively, consisting primarily of investments in certificates of deposit, U.S. Treasuries, government securities and corporate debt securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are 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 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 March 31, 2017 and December 31, 2016, 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 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 March 31, 2017, 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. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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 March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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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 our 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, 2016.

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 $198.5 million, $117.7 million and $53.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, and $66.2 million for the three months ended March 31, 2017. As of March 31, 2017, we had an accumulated deficit of $549.6 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 Corporation and its subsidiaries, or Celgene, focused on cancer metabolism and metabolic immuno-oncology. We have devoted substantially all of our efforts to research and development. We are in clinical development stages of our product candidates and we have not yet obtained marketing approval for a product candidate. 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:

 

    initiate and continue clinical trials for our product candidates, including: ivosidenib, AG-881 and AG-348;

 

    continue our research and preclinical development of our product candidates;

 

    seek to identify additional product candidates;

 

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

 

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

 

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

 

    maintain, expand and protect our intellectual property portfolio;

 

    hire additional clinical, quality control and scientific personnel;

 

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

 

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

 

    acquire or in-license other 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

 

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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 March 31, 2017, together with anticipated interest income, the anticipated expense reimbursements under our collaboration agreements, but excluding any additional program-specific milestone payments, and the proceeds from our April 2017 underwritten public stock offering will fund our operating and capital expenditure requirements through at least the end of 2019. Our estimate as to how long we expect our existing cash and cash equivalents to be available 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:

 

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

 

    the success of, and developments regarding, our collaborations;

 

    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;

 

    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.

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. We do not expect to generate significant commercial revenue unless, and until, we obtain marketing approval for and commercialize at least one of our product candidates, which may not occur for many years, if at all. In addition, our product candidates, if approved, may not achieve commercial success. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve sufficient sales revenue to achieve or maintain profitability. 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.

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, which are limited in scope and duration. 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 require us to enter into agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

 

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If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

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, rare genetic diseases, or 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 May 2016 we entered into a new collaboration agreement, 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 alter 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:

 

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

 

    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.

 

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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, IDHIFA® (enasidenib), ivosidenib and AG-881 for the treatment of hematological and solid tumors and AG-348 for the treatment of pyruvate kinase, or 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 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:

 

    successful enrollment in, and completion of, clinical trials;

 

    safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority for marketing approval;

 

    timely receipt of marketing approvals from applicable regulatory authorities;

 

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

 

    the performance of our collaborators;

 

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

 

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

 

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

 

    effectively competing with other therapies;

 

    continuing acceptable safety profile for the medicines following approval;

 

    enforcing and defending intellectual property rights and claims; and

 

    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. Celgene submitted an NDA to the FDA for IDHIFA® (enasidenib) in relapsed and/or refractory, or R/R, acute myeloid leukemia, or AML, in December 2016, and in March 2017, we announced that this NDA was accepted by the FDA with priority review and a Prescription Drug User Fee Act, or PDUFA, action date of August 30, 2017. We plan to explore a similar regulatory pathway for ivosidenib, and we expect to submit a NDA ivosidenib in IDH1 mutant-positive R/R AML by the end of 2017. However, we can provide no assurance that we will successfully submit an NDA for ivosidenib, or that any NDAs, once submitted, will receive regulatory approval on the timeframe we expect, or at all.

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

 

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the FDA or any comparable foreign regulatory authority that a product candidate may not continue development or is not approvable. For instance, in December 2016, we withdrew our investigational new drug application for AG-519, our second PKR activator, following verbal notification of a clinical hold from the FDA relating to a previously disclosed case of drug-induced cholestatic hepatitis which occurred in our phase 1 clinical trial of AG-519 in healthy volunteers. Although these decisions and this hepatic adverse event finding do not affect our ongoing global phase 2 clinical trial (DRIVE PK) for AG-348, our first PKR activator, we cannot provide any assurances that there will not be similar or other treatment-related severe adverse events in DRIVE PK or our other clinical trials, that our other trials will not be placed on clinical hold in the future, or that patient recruitment for DRIVE PK or our other trials will not be adversely impacted.

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:

 

    be delayed in obtaining marketing approval for our product candidates;

 

    not obtain marketing approval at all;

 

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

 

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

 

    be subject to additional post-marketing testing requirements; or

 

    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:

 

    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;

 

    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;

 

    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;

 

    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;

 

    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;

 

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    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:

 

    severity of the disease under investigation;

 

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

 

    eligibility criteria for the study in question;

 

    perceived risks and benefits of the product candidate under study;

 

    efforts to facilitate timely enrollment in clinical trials;

 

    patient referral practices of physicians;

 

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

 

    proximity and availability of clinical trial sites for prospective patients.

Utilizing our precision medicine approach, we 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 program for AG-348 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 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, both Daiichi Sankyo Company, Ltd., with DS-1001b, and Bayer AG, with BAY1436032, are currently conducting clinical trials in patients with IDH1 mutant positive-cancers, and these trials and other trials may compete with our clinical trials of ivosidenib and/or AG-881 for eligible patients with 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 ivosidenib or AG-881 in a timely and cost-effective manner.

 

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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 most advanced 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. For instance, in December 2016, we withdrew our investigational new drug application for AG-519, our second PKR activator, following verbal notification of a clinical hold from the FDA relating to a previously disclosed case of drug-induced cholestatic hepatitis which occurred in our phase 1 clinical trial of AG-519 in healthy volunteers. Although these decisions and this hepatic adverse event finding do not affect our ongoing global phase 2 clinical trial (DRIVE PK) for AG-348, our first PKR activator, we cannot provide any assurances that there will not be similar or other treatment-related severe adverse events in DRIVE PK or our other clinical trials, that our other trials will not be placed on clinical hold in the future, or that patient recruitment for DRIVE PK or our other trials will not be adversely impacted.

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.

 

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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 will 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 companion 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:

 

    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;

 

    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

 

    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 of any of these events, 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. Celgene submitted an NDA to the FDA for IDHIFA® (enasidenib) in R/R AML in December 2016, and in March 2017, we announced that this NDA was accepted by the FDA with priority review and a PDUFA action date of August 30, 2017. We plan to explore a similar regulatory pathway for ivosidenib, and we expect to submit a NDA ivosidenib in IDH1 mutant-positive R/R AML by the end of 2017. It is possible that the FDA may refuse to accept for substantive review any NDAs that we submit for our product candidates, including the NDA that we plan to submit for ivosidenib, 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:

 

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

 

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

 

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

 

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

 

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

 

    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;

 

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

 

    the product may become less competitive; and

 

    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:

 

    efficacy and potential advantages compared to alternative treatments;

 

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

 

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

 

    convenience and ease of administration compared to alternative treatments;

 

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

 

    ensuring uninterrupted product supply;

 

    the strength of marketing and distribution support;

 

    sufficient third-party coverage or reimbursement; and

 

    the prevalence and severity of any side effects.

If we are unable to 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 process 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:

 

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

 

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

 

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

 

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

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of product revenue to us are likely to be lower than if we were to market and sell any medicines that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product

 

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candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our medicines effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing 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 AML and high risk myelodysplasia. For example, Jazz Pharmaceuticals plc, Novartis, Seattle Genetics, Inc. and Abbvie Inc. (in collaboration with Roche Holdings Inc., or Roche) 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 and Novartis. 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.

 

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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

 

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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:

 

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

 

    injury to our reputation and significant negative media attention;

 

    withdrawal of clinical trial participants;

 

    significant costs to defend the related litigation;

 

    substantial monetary awards to trial participants or patients;

 

    loss of revenue;

 

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

 

    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 as we advance or expand our 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.

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 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.

We are party to several collaboration agreements. 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. 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, pose the following risks to us:

 

    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 IDHIFA® (enasidenib), 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 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.

 

    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.

 

    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.

 

    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.

 

    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 IDHIFA® (enasidenib) 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.

 

    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.

 

    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 IDHIFA® (enasidenib) under the 2010 Agreement 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.

 

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

 

    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 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.

 

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

We 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 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 responsibility to comply with any such standards. We and these third parties are required to comply with current good clinical practices, or cGCP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for all of our 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 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 U.S. government-sponsored database, clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, third parties on whom we rely may also have relationships with other entities, some of which may be our competitors. In addition, these third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised 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 our product candidates 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.

 

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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:

 

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

 

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

 

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

 

    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 most advanced 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

 

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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. We are not aware of any other legal proceedings having been filed against us to date. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we or one of our collaborators are found to infringe a third party’s intellectual property rights, we or they could be required to obtain a license from such third party to continue developing and marketing our medicines and technology. However, we or our collaborators may not be able to obtain any required license on commercially reasonable terms or at all. Even if we or our collaborators were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us. We or our collaborators could be

 

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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 our management.

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.

 

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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, nor does it assure approval of the candidate product by FDA.

In the United States, IDHIFA® (enasidenib) and ivosidenib 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 IDHIFA® (enasidenib) and ivosidenib 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, or EU, 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 must be approved for reimbursement before the product can be approved for sale in that country. We or our collaborators may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory

 

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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.

Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. On March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, the referendum could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business.

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:

 

    restrictions on such medicine, manufacturers or manufacturing processes;

 

    restrictions on the labeling or marketing of a medicine;

 

    restrictions on distribution or use of a medicine;

 

    requirements to conduct post-marketing studies or clinical trials;

 

    warning letters or untitled letters;

 

    withdrawal of the medicine from the market;

 

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

 

    recall of medicines;

 

    damage to relationships with any potential collaborators;

 

    unfavorable press coverage and damage to our reputation;

 

    fines, restitution or disgorgement of profits or revenue;

 

    suspension or withdrawal of marketing approvals;

 

    refusal to permit the import or export of our medicines;

 

    product seizure;

 

    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 EU 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:

 

    the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

 

    the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $10,781.40 to $21,562.80 per false claim;

 

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

 

    HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

    the 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

 

    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

 

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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 ACA. Among the provisions of the ACA of potential importance to our business and our product candidates are the following:

 

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

 

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

 

    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;

 

    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;

 

    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;

 

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

 

    expansion of eligibility criteria for Medicaid programs;

 

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

 

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

 

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

 

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

 

    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

 

    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 ACA 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.

In addition, with the new Administration and Congress, there may be additional legislative changes, including potentially repeal and replacement of certain provisions of the ACA. It remains to be seen, however, whether new legislation will be enacted and, if so, precisely what any new legislation will provide and what impact it will have on the availability of healthcare and containing or lowering the cost of healthcare. For example, it is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. While the timing and scope of any potential future legislation to repeal and replace ACA provisions is highly uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceutical industry could also be repealed along with ACA coverage expansion provisions.

Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates. We expect that the ACA, 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 additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market. Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

 

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The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Administration have stated that they will address such costs through new legislative and administrative measures. The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.

The efforts of the Administration to pursue regulatory reform may limit FDA’s ability to engage in oversight and implementation activities in the normal course, and that could negatively impact our business.

The Trump Administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, President Trump issued an executive order, applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This executive order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

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

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

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

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

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our key executives and scientific leadership and to attract, retain and motivate qualified personnel.

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

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

 

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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 Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

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;

 

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    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 to 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;

 

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    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 March 31, 2017, 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.

 

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

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

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 maintain compliance with Section 404, we 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.

 

57


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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.

 

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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: May 4, 2017     By:  

/s/ David P. Schenkein

     

David P. Schenkein

President and Chief Executive Officer

(principal executive officer)

Date: May 4, 2017     By:  

/s/ Andrew Hirsch

     

Andrew Hirsch

Chief Financial Officer

(principal financial officer)

 

59


Table of Contents

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     
  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                  X  
  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.                  X  
  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.                  X  
  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.                  X  
101.INS    XBRL Instance Document                  X  
101.SCH    XBRL Taxonomy Extension Schema Document                  X  
101.CAL    XBRL Taxonomy Calculation Linkbase Document                  X  
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document                  X  
101.LAB    XBRL Taxonomy Label Linkbase Document                  X  
101.PRE    XBRL Taxonomy Presentation Linkbase Document                  X  

 

60

EX-31.1 2 d368298dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

CERTIFICATION

I, David P. Schenkein, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Agios Pharmaceuticals, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2017

 

/s/ David P. Schenkein

David P. Schenkein
President and Chief Executive Officer
(principal executive officer)
EX-31.2 3 d368298dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

CERTIFICATION

I, Andrew Hirsch, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Agios Pharmaceuticals, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2017

 

/s/ Andrew Hirsch

Andrew Hirsch
Chief Financial Officer
(principal financial officer)
EX-32.1 4 d368298dex321.htm EX-32.1 EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Agios Pharmaceuticals, Inc. (the “Company”) for the fiscal quarter ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, David P. Schenkein, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge on the date hereof:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 4, 2017

 

/s/ David P. Schenkein

David P. Schenkein
President and Chief Executive Officer
(principal executive officer)
EX-32.2 5 d368298dex322.htm EX-32.2 EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Agios Pharmaceuticals, Inc. (the “Company”) for the fiscal quarter ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Andrew Hirsch, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge on the date hereof:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 4, 2017

 

/s/ Andrew Hirsch

Andrew Hirsch
Chief Financial Officer
(principal financial officer)
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Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. 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BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">47.70</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercisable at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,909,093</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">37.76</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested and expected to vest at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">47.70</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> At March&#xA0;31, 2017, the total unrecognized compensation expense related to unvested stock option awards was $104.5 million, which we expect to recognize over a weighted-average period of approximately 2.68&#xA0;years.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Restricted stock units</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We may grant awards of RSUs to non-employee directors 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 our common stock.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table presents RSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="65%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Number&#xA0;of</b><br /> <b>Stock&#xA0;Units</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b><font style="WHITE-SPACE: nowrap">Weighted-average</font></b><br /> <b>grant&#xA0;date&#xA0;fair&#xA0;value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at December&#xA0;31, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">77,050</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">49.60</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">57,100</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50.40</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(7,300</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">39.76</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">126,850</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">50.52</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> As of March&#xA0;31, 2017, there was approximately $4.2 million of total unrecognized compensation expense related to RSUs, which we expect to be recognized over a weighted-average period of 1.5 years.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Performance-based stock options</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the three months ended March&#xA0;31, 2017 and 2016, 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 us. However, certain performance-based stock options issued in prior periods were still outstanding as of March&#xA0;31, 2017. Performance-based vesting criteria for options primarily relate to milestone events specific to our corporate goals, including but not limited to certain preclinical, clinical and regulatory development milestones related to our 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 our management&#x2019;s best estimates. As of March&#xA0;31, 2017, all performance-based milestones had been achieved.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Performance-based stock units</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We may grant awards of PSUs to non-employee directors and employees on a discretionary basis pursuant to the 2013 Plan. Each PSU entitles the holder to receive, at the achievement of the performance-based and service-based criteria, a specified number of shares of our stock. Performance-based vesting criteria primarily relate to milestone events specific to our corporate goals, specifically regulatory development milestones related to our product candidates.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> The following table presents PSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="65%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Number&#xA0;of</b><br /> <b>Stock&#xA0;Units</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b><font style="WHITE-SPACE: nowrap">Weighted-average</font></b><br /> <b>grant&#xA0;date&#xA0;fair&#xA0;value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at December&#xA0;31, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">200,613</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">53.36</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">200,613</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">53.36</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Stock-based compensation expense associated with these PSUs is recognized if the performance condition is considered probable of achievement using our management&#x2019;s best estimates. As of March&#xA0;31, 2017, there was approximately $10.7 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are not considered probable of achievement.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>2013 Employee Stock Purchase Plan</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. The 2013 ESPP is administered by our Board of Directors or by a committee appointed by our 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 our common stock at the beginning or end of the offering period, whichever is lower, subject to Internal Revenue Service limits. We issued 33,521 shares and 12,327 shares during the three months ended March&#xA0;31, 2017 and 2016, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 327,272 shares of our common stock. As of March&#xA0;31, 2017, we had 239,921 shares available for future issuance under the 2013 ESPP.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b><i>Stock-based compensation expense</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the three months ended March&#xA0;31, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="77%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,902</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">8,564</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Restricted stock units</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">595</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">359</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Performance-based stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Employee Stock Purchase Plan</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">237</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">138</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,734</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,107</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="81%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Three&#xA0;Months&#xA0;Ended</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March&#xA0;31,</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Research and development expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,025</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,528</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> General and administrative expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,709</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,579</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,734</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,107</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> Q1 -66065000 Large Accelerated Filer <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>3. Fair Value Measurements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We record cash equivalents and marketable securities at fair value. ASC 820, <i>Fair Value Measurements and Disclosures</i>, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Level 1</i> &#x2013; Unadjusted quoted prices in active markets for identical assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Level 2</i> &#x2013; 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Level 3</i> &#x2013; Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of March&#xA0;31, 2017 (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 1</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level&#xA0;3</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Cash equivalents</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">178,663</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">19,985</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">198,648</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Marketable securities:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S. Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">12,497</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,493</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">184,390</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">184,390</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">273,693</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">227,858</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">501,551</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March&#xA0;31, 2017.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> There have been no changes to the valuation methods during the three months ended March&#xA0;31, 2017. We evaluate 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 months ended March&#xA0;31, 2017. We have no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March&#xA0;31, 2017.</p> </div> 0 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On January&#xA0;1, 2017, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No.&#xA0;2016-09, <i>Compensation&#x2014;Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting</i>, or 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. The following summarizes the effects of the adoption on our unaudited condensed consolidated financial statements:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Income taxes &#x2013;</i> Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We did not recognize any discrete adjustments to income tax expense for the three months ended March&#xA0;31, 2017, as we are in a full valuation allowance position. We have applied the modified retrospective adoption approach beginning in 2017. This cumulative-effect adjustment related to tax assets that had previously arisen from tax deductions for stock-based compensation expenses that were greater than the compensation recognized for financial reporting. These assets had been excluded from the deferred tax assets and liabilities totals on the balance sheet as a result of certain realization requirements previously included in Accounting Standards Codification, or ASC, 718, <i>Compensation&#x2014;Stock Compensation</i>. We recorded a cumulative-effect adjustment of approximately $32.7 million through retained earnings and deferred tax assets; however, due to the full valuation allowance, the only impact of the retrospective adoption is footnote presentation which will be presented in the December&#xA0;31, 2017 year-end financials.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Forfeitures &#x2013;</i> Upon adoption of ASU 2016-09, entities may also elect to estimate forfeitures and adjust the estimate when it is likely to change, which is consistent with pre-ASU 2016-09 guidance, or account for forfeitures as they occur. Beginning in January&#xA0;1, 2017, we elected to account for forfeitures as they occur. The ASU is applied on a prospective basis, and prior periods have not been adjusted to reflect this change in accounting policy. The cumulative effect of the change in forfeiture policy in prior periods did not have a material impact of on our statement of operations or balance sheet.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Upon adoption, no other aspects of ASU 2016-09 had a material effect on our unaudited condensed consolidated financial statements or related footnote disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> There have been no other material changes to the significant accounting policies previously disclosed in the Annual Report on Form&#xA0;10-K for the year ended December&#xA0;31, 2016.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of March&#xA0;31, 2017 (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="67%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 1</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level 2</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Level&#xA0;3</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Total</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Cash equivalents</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">178,663</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">19,985</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">198,648</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Marketable securities:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">15,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S. Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">12,497</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,493</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,990</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">184,390</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">184,390</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">273,693</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">227,858</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">501,551</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>9. Loss per Share</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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, RSUs, unvested restricted stock and ESPP options are considered to be common stock equivalents. Furthermore, performance-based stock units with vesting conditions that were not met as of March&#xA0;31, 2017 are excluded as common stock equivalents.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Since we had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share was the same for all periods presented.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,318,350</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Restricted stock units</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">126,850</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">73,800</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Employee stock purchase plan options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,227</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,262,177</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,396,377</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <b>6. Accrued Expenses</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Accrued expenses consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="72%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,<br /> 2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,<br /> 2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued compensation</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,285</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,092</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued research and development costs</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">13,474</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,266</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued professional fees</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,060</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">476</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,295</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">25,114</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,002</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>5. Celgene Collaboration Agreements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> To date, our revenue has primarily been generated from our collaboration agreements with Celgene, or collectively, the Collaboration Agreements. Celgene is a related party through ownership of our common stock. In April 2010, we entered into a collaboration agreement focused on cancer metabolism. The agreement was amended in October 2011 and July 2014, or collectively the agreement together with the amendments, the 2010 Agreement. On April&#xA0;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, entered into a collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the development and commercialization of AG-881 products. On May&#xA0;17, 2016, we entered into a master research and collaboration agreement, or the 2016 Agreement.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>2016 Agreement</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In May 2016, we entered into the 2016 Agreement focused on MIO. In addition to new programs identified under the 2016 Agreement, both parties have also agreed that all future development and commercialization of two remaining cancer metabolism programs discovered under the 2010 Agreement, including <font style="WHITE-SPACE: nowrap">AG-270,</font> a program focused on methylthioadenosine phosphorylase, or MTAP, deleted cancers, will now be governed by the 2016 Agreement.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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&#xA0;17, 2020, and may be extended for up to two, or in specified cases, up to four additional one-year terms.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 the completion of an initial phase 1 dose escalation study.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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. We may conduct further research and pre-clinical and clinical development activities on any continuation program, at our expense, through the completion of an initial phase 1 dose escalation study.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We granted Celgene the right to obtain exclusive options for 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: (i)&#xA0;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)&#xA0;January&#xA0;1, 2030. Research programs that have applications in the inflammation or autoimmune, or I&amp;I, field that may result from the 2016 Agreement will also be subject to the exclusive options described above.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We will retain rights to any program that Celgene does not designate for further development or as to which it does not exercise its option.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Under the terms of the 2016 Agreement, following Celgene&#x2019;s exercise of its option with respect to a program, the parties 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&amp;I field. Under each co-development and co-commercialization agreement, the two parties 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, the parties 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Co-development and co-commercialization agreements</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Under each co-development and co-commercialization agreement entered into under the 2016 Agreement, the parties 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 in the IO field. 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, we and Celgene will alternate, on a program-by-program basis, being the lead party for the United States, with us having the right to be the lead party for the first such program, and each party will 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.</p> <p style="MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; MARGIN-TOP: 0pt"> </p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>License agreements</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Financial terms</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Under the terms of the 2016 Agreement, we received an initial upfront payment in the amount of $200.0&#xA0;million. The 2016 Agreement provides specified rights to extend the research term for up to two, or in specified cases, up to four, additional years by paying a $40.0&#xA0;million per-year extension fee. Celgene will pay an $8.0&#xA0;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 $30.0&#xA0;million for any designated development program and at least $35.0&#xA0;million for any continuation programs. In certain cases, Celgene may exercise its option to develop and commercialize two early-stage I&amp;I programs, prior to Celgene designating the program for further development, by paying an option exercise fee of $10.0&#xA0;million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="32%"></td> <td valign="bottom" width="3%"></td> <td width="44%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom" nowrap="nowrap"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; WIDTH: 30.65pt; BORDER-BOTTOM: rgb(0,0,0) 1pt solid; MARGIN-TOP: 0pt"> <b>Program</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" align="center"> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Milestone</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Amount</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top">65/35 program in IO field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified clinical development event</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">$25.0 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top">65/35 program in IO field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified regulatory milestone events</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"> Up&#xA0;to&#xA0;$183.8&#xA0;million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top">50/50 program in IO field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified clinical development event</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">$20.0 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top">50/50 program in IO field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified regulatory milestone events</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">Up to $148.8 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top">I&amp;I field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified clinical development event</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">$25.0 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top">I&amp;I field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified regulatory milestone events</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">Up to $236.3 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top">I&amp;I field</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">Specified commercial milestone events</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">Up to $125.0 million</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Additionally, for each licensed program in the I&amp;I field, we are eligible to receive royalties at tiered, low double-digit percentage rates on Celgene&#x2019;s net sales, if any.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Opt-out right</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Under the 2016 Agreement, we 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 we will undertake transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at our expense. Further, in lieu of the profit or loss sharing described above, we would be eligible to receive royalties at tiered, low double-digit percentage rates on Celgene&#x2019;s net sales, if any, of the applicable licensed products. However, we would continue to be eligible to receive the developmental and regulatory milestone-based payments described above.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Term</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The term of the 2016 Agreement commenced on May&#xA0;17, 2016 and, if not terminated earlier, will expire upon the 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <i>Termination</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Subject to specified exceptions, Celgene may terminate the 2016 Agreement in its entirety for any reason by providing us 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 their 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.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Exclusivity</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> While any of Celgene&#x2019;s options remain available under the 2016 Agreement, subject to specified exceptions, we may not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO or I&amp;I field with specified activity against a metabolic target.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the term of each co-development and co-commercialization agreement and license agreement, subject to specified exceptions, neither we 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>AG-120 Letter Agreement</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On May&#xA0;17, 2016, we entered into a letter agreement with Celgene regarding ivosidenib, or the AG-120 Letter Agreement. Under the AG-120 Letter Agreement, the parties agreed to terminate the 2010 Agreement, effective as of August&#xA0;15, 2016, as to the program directed to the isocitrate dehydrogenase 1, or IDH1, target, for which ivosidenib 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 obtained global rights to ivosidenib and the IDH1 program. Neither party will have any further financial obligation, including royalties or milestone payments, to the other concerning ivosidenib or the IDH1 program. Under the terms of the termination, 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 termination does not affect the AG-881 Agreements, which are directed to both the IDH1 target and the isocitrate dehydrogenase 2, or IDH2, target.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>AG-881 Agreements</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On April&#xA0;27, 2015, we entered into the AG-881 Agreements. The AG-881 Agreements establish a joint worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, we received an initial upfront payment of $10.0&#xA0;million in May 2015 and are eligible to receive milestone-based payments described below. The parties will split all worldwide development costs equally, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We are eligible to receive up to $70.0&#xA0;million in potential milestone payments related to AG-881 under the AG-881 Agreements. The potential milestone payments are comprised of: (i)&#xA0;a $15.0&#xA0;million milestone payment for filing of a first NDA in a major market and (ii)&#xA0;up to $55.0&#xA0;million in milestone payments upon achievement of specified regulatory milestone events. We may also receive royalties at tiered, low- to mid-teen percentage rates on net sales if we elect not to participate in the development and commercialization of AG-881.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>2010 Agreement</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In April 2010, we entered into the 2010 Agreement, which was amended in October 2011 and July 2014. The goal of the collaboration was to discover, develop and commercialize disease-altering therapies in oncology based on our cancer metabolism research platform. We initially led 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Upon agreement to terminate the 2010 Agreement, effective as of August&#xA0;15, 2016, as to the program directed to the IDH1 target, for which ivosidenib is the lead development candidate, the sole program remaining under the 2010 Agreement is IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib), a co-commercialized licensed program for which Celgene leads and funds global development and commercialization activities. We have exercised our right to participate in a portion of commercialization activities in the United States for IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) in accordance with the applicable commercialization plan.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Under the remaining terms of the 2010 Agreement, we are eligible to receive up to $95.0&#xA0;million in potential milestone payments for the IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) program. The potential milestone payments are comprised of: (i)&#xA0;up to $70.0&#xA0;million in milestone payments upon achievement of specified ex-U.S. regulatory milestone events and (ii)&#xA0;a $25.0&#xA0;million milestone payment upon achievement of a specified commercial milestone event.</p> <p style="MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; MARGIN-TOP: 0pt"> </p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Under the 2010 Agreement, we may also receive royalties at tiered, low-double digit to mid-teen percentage rates on net sales and have the option to participate in the development and commercialization of certain products in the United States. Assuming all other revenue recognition criteria are met, royalty payments will be recognized as revenue in the period in which they are earned. To date, we have not earned any royalty payments under the 2010 Agreement.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Unless terminated earlier by either party, the term of the 2010 Agreement will continue until the expiration of all royalty terms with respect to IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib). Celgene may terminate this agreement for convenience in its entirety upon ninety days written notice to us. 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. Either party may terminate the agreement in the event of specified insolvency events involving the other party.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Accounting analysis and revenue recognition &#x2013; collaboration revenue</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>April 2015 &#x2013; May 2016</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The AG-881 Agreements 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, under the provisions of ASC 605-25, <i>Multiple Element Arrangements,</i> we identified the remaining deliverables under the 2010 Agreement and the AG-881 Agreements, and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 our best estimate of selling price for each unit of accounting. The undelivered items, which are each considered by us to have stand-alone value and therefore are separate units of accounting, the related best estimate of selling price at April&#xA0;27, 2015, and the method of recognizing the allocated consideration, for each unit of accounting are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Licenses for the AG-881 program</u>: We 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. Our 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. We developed a best estimate of selling price of the licenses of $33.2 million. We recognize 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 three months ended March&#xA0;31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.9 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Four separate on-going development services for which we determined we are acting as the principal of all development activities (each of which is a separate unit of accounting)</u>: We developed the best estimate of selling price for all four of the on-going development services of $12.7 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 our management&#x2019;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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, <i>Revenue Recognition &#x2013; Principal Agent Considerations</i>, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. During the three months ended March&#xA0;31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $1.0 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Four separate on-going development services for which we determined we are not acting as the principal of all development activities (each of which is a separate unit of accounting)</u>: We developed the best estimate of selling price for all four of the on-going development services of $97.3 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 our management&#x2019;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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, we determined we are not the principal of all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. During the three months ended March&#xA0;31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $4.8 million as a reduction of research and development costs related to these services.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="left"><u>On-going research and development</u>: We developed the best estimate of selling price of the research and development services of $30.5 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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. For the three months ended March&#xA0;31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $3.6 million as collaboration revenue.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Committee participations under the 2010 Agreement and AG-881 Agreements</u>: We developed the best estimate of selling price of the committee participation services of $0.8 million using our management&#x2019;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 three months ended March&#xA0;31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.1 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> As a result of Celgene assuming the primary development responsibilities for IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) in the first quarter of 2015, we recorded $0.5 million of third-party costs incurred on behalf of Celgene during the three months ended March&#xA0;31, 2016 as a reduction of research and development costs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Beginning in the third quarter of 2015, we initiated a phase 1b frontline combination clinical trial of IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) and ivosidenib for which we 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, we determined that we are the principal for the efforts related to the IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) arm of the combination trial but are the agent for the efforts related to the ivosidenib arm of the combination trial. Accordingly, consideration earned related to the IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) arm of the combination trial is recognized as collaboration revenue in the period earned, and consideration earned related to the ivosidenib arm of the combination trial is reported as a reduction of research and development expense in the period earned. During the three months ended March&#xA0;31, 2016, we recognized $0.7 million in collaboration revenue and $0.2 million as a reduction of research and development costs related to the combination trial.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the three months ended March&#xA0;31, 2016, we incurred an additional $3.3 million in reimbursable development expenses related to the ivosidenib 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 16pt; MARGIN-TOP: 0pt"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Post-May 2016</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The 2016 Agreement 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, we identified the undelivered elements under the Collaboration Agreements and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 Collaboration Agreements that were deemed to be determinable at the modification date, to each unit of accounting relative to its best estimate of selling price. During the three months ended March&#xA0;31, 2017, we received $8.0 million from Celgene upon the designation of <font style="WHITE-SPACE: nowrap">AG-270,</font> our program focused on MTAP-deleted cancers, as a development candidate. This payment is contingent consideration and is allocated to each unit of accounting, discussed below, relative to its best estimate of selling price. The undelivered items, which are each considered by us to have stand-alone value and therefore are separate units of accounting, the related best estimate of selling price at May&#xA0;17, 2016, and the method of recognizing the allocated consideration, for each unit of accounting are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Three separate development services for which we determined we are acting as the principal for all development activities (each of which is a separate unit of accounting)</u>: We developed the best estimate of selling price for all three of the development services of $67.8 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 our management&#x2019;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. We expect the services to be performed through 2019. When considering the factors included within ASC 605-45, we determined we are the principal for all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March&#xA0;31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $3.7 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; MARGIN-TOP: 0pt"> </p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="left"><u>Three separate on-going development services for which we determined we are not acting as the principal for all development activities (each of which is a separate unit of accounting)</u>: We developed the best estimate of selling price for all three development services of $22.4 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 our management&#x2019;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. We expect the services to be performed through 2019. When considering the factors included within ASC 605-45, we determined we are not the principal for all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. For the three months ended March&#xA0;31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $2.8 million as a reduction of research and development costs related to these services.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>On-going research and development</u>: We developed the best estimate of selling price of the research and development services of $207.0 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 three months ended March&#xA0;31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of $6.6 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Committee participations under the 2010 Agreement, AG-881 Agreements and 2016 Agreement</u>: We developed the best estimate of selling price of the committee participation services of $1.5 million using our management&#x2019;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 three months ended March&#xA0;31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of less than $0.1 million as collaboration revenue.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="PAGE-BREAK-INSIDE: avoid"> <td width="5%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x2022;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"><u>Additional development activities for which we determined we are acting as the principal of all development activities</u>: We developed the best estimate of selling price of the development service of $48.7 million using our management&#x2019;s best estimate of the cost of obtaining these services at arm&#x2019;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 our management&#x2019;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, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March&#xA0;31, 2017, we did not recognize any revenue associated with this unit of account.</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 we perform certain services for which we are 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 we receive less reimbursement than initially estimated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> During the three months ended March&#xA0;31, 2017 and 2016, we recognized a total of $10.5 million and $31.3 million, respectively, as collaboration revenue and recognized $2.8 million and $8.8 million, respectively, as a reduction of research and development expenses. As of March&#xA0;31, 2017 and December&#xA0;31, 2016, we recorded a collaboration receivable of $11.3 million and $4.9 million, respectively, related to reimbursable development costs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In determining the current and noncurrent classification of deferred revenue, we consider 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Accounting analysis and revenue recognition &#x2013; milestone revenue</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We concluded that certain milestone payments that may be received under the Collaboration Agreements are substantive. Factors considered in the evaluation of the milestones included an assessment of whether: (i)&#xA0;the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone, (ii)&#xA0;the consideration relates solely to past performance, and (iii)&#xA0;the consideration is reasonable relative to all of the deliverables and payment terms within the Collaboration Agreements. Revenue from substantive milestones is recognized as revenue in its entirety upon successful accomplishment of the milestones, assuming all other revenue recognition criteria are met. Milestones not deemed substantive, are allocated to each unit of accounting, discussed above, relative to our best estimate of selling price for each unit of accounting and recognized on a proportional performance basis or ratably over the expected period of performance.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In January 2016, a substantive clinical development milestone related to the IDHIFA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> (enasidenib) program under the 2010 Agreement was achieved and we received a milestone payment of $25.0 million, which was recognized as revenue during the three months ended March&#xA0;31, 2016. No other milestones were earned during the three months ended March&#xA0;31, 2017 and 2016. The next potential milestones expected to be achieved under the Collaboration Agreements relate to specified ex-U.S. regulatory events. Achievement of these events will result in milestone payments of up to $70.0 million. Additionally, the next potential payment we expect to receive under the Collaboration Agreements is related to Celgene&#x2019;s exercise of its option to develop and commercialize <font style="WHITE-SPACE: nowrap">AG-270,</font> the program focused on MTAP-deleted cancers. This exercise will result in a license fee of at least $30.0 million.</p> </div> 801000 136585000 <div> <p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <b>8. Income Taxes</b></p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> There was no (benefit) provision for income taxes during the three months ended March&#xA0;31, 2017 and 2016.</p> <p style="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> We account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. We evaluated whether any uncertain tax positions arise from commencing operations of our wholly owned subsidiary, Agios International Sarl, and determined no uncertain tax positions existed. As of March&#xA0;31, 2017 and December&#xA0;31, 2016, we did not have any uncertain tax positions recorded.</p> </div> -6889000 4146000 77555000 -66166000 6379000 109552000 -994000 3425000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Recent accounting pronouncements</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Revenue from Contracts with Customers</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In May 2014, the FASB issued ASU No.&#xA0;2014-09, <i>Revenue from Contracts with Customers (Topic 606)</i>, or ASU 2014-09. Subsequently, the FASB issued ASU 2015-14, <i>Revenue from Contracts with Customers (Topic 606)</i>, which adjusted the effective date of ASU 2014-09; ASU No.&#xA0;2016-08, <i>Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)</i>, which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No.&#xA0;2016-10, <i>Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,</i> which clarifies identifying performance obligations and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No.&#xA0;2016-12, <i>Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients</i>, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, or collectively, the Revenue ASUs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Revenue ASUs provide an accounting standard 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&#xA0;15, 2017, with an option to early adopt for interim and annual periods beginning after December&#xA0;15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We are in process of initiating our overall implementation plan and evaluation of the impact of the new standard on our accounting policies. We will adopt the new standard effective January&#xA0;1, 2018 under the modified retrospective method. We are in the process of determining the impact of the Revenue ASUs on our financial statements; however, the adoption of the Revenue ASUs may have a material impact on revenue recognition, our notes to consolidated financial statements and our internal controls over financial reporting.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i>Other Recent Accounting Pronouncements</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In October 2016, the FASB issued ASU No.&#xA0;2016-16, <i>Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory</i>, or ASU 2016-16, which removes the prohibition in ASC 740, <i>Income Taxes</i>, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for us for annual periods beginning after December&#xA0;15, 2017, and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In February 2016, the FASB issued ASU No.&#xA0;2016-02,<i>&#xA0;Leases (Topic 842),</i> or 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&#xA0;15, 2018 and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 our financial statements upon adoption.</p> </div> -40000 -67047000 26740000 4046000 101000 -1924000 881000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>4. Marketable Securities</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Marketable securities at March&#xA0;31, 2017 and December&#xA0;31, 2016 consisted of investments in certificates of deposit, U.S. Treasuries, government securities and corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our marketable securities as available-for-sale pursuant to ASC 320, <i>Investments &#x2013; Debt and Equity Securities</i>. Marketable securities are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive loss in stockholders&#x2019; equity and a component of total comprehensive loss in the condensed consolidated 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 three months ended March&#xA0;31, 2017 and 2016 and, as a result, we did not reclassify any amounts out of accumulated other comprehensive loss for the periods.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Marketable securities at March&#xA0;31, 2017 consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="59%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized&#xA0;Cost</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Gains</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Losses</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Fair</b><br /> <b>Value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,240</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,242</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,599</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(66</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">17,519</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(22</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">17,497</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168,282</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(74</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168,208</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Non-current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,760</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(13</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,748</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,500</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(7</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,493</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,215</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(37</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,182</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">303,115</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(221</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">302,903</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Marketable securities at December&#xA0;31, 2016 consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="58%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized&#xA0;Cost</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Gains</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Losses</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Fair</b><br /> <b>Value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,280</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(3</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,279</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S. Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">141,678</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(62</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">141,618</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(23</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,510</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">208,285</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(135</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">208,153</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Non-current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(13</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,593</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,499</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(21</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,478</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,248</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(69</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,179</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">413,123</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">13</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(326</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">412,810</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> At March&#xA0;31, 2017 and December&#xA0;31, 2016, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i)&#xA0;have a maturity of one to two years, and (ii)&#xA0;we do not intend to liquidate within the next twelve months, although these funds are available for use and therefore classified as available-for-sale.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We review 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&#x2019;s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the condensed consolidated statements of operations if we experienced a credit loss, have the intent to sell the marketable security, or if it is more likely than not that we 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 our investment policy, the severity and the duration of the impairment, and changes in value subsequent to the end of the period.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> At March&#xA0;31, 2017 and December&#xA0;31, 2016, we held 123 and 158 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 March&#xA0;31, 2017 and December&#xA0;31, 2016 was $241.8 million and $335.4 million, respectively. There were no individual securities that were in a significant unrealized loss position as of March&#xA0;31, 2017 and December&#xA0;31, 2016. We evaluated our 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 we will be required to sell the securities, and we do 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 March&#xA0;31, 2017 and December&#xA0;31, 2016.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <b>1. Overview and Basis of Presentation</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <b><i>References to Agios</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Throughout this Quarterly Report on Form&#xA0;10-Q,&#xA0;&#x201C;we,&#x201D; &#x201C;us,&#x201D; and &#x201C;our,&#x201D; and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and &#x201C;our Board of Directors&#x201D; refers to the board of directors of Agios Pharmaceuticals, Inc.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Overview</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> We are a biopharmaceutical company committed to the fundamental transformation of patients&#x2019; lives through scientific leadership in the field of cellular metabolism, with the goal of making transformative, first- or best-in-class medicines. Our areas of focus are cancer metabolism, rare genetic diseases, or RGDs, which are diseases that are directly caused by changes in genes or chromosomes, often passed from one generation to the next, and metabolic immuno-oncology, or MIO, which is a developing field that aims to modulate the activity of relevant immune cells (or tumor microenvironment) by targeting critical metabolic nodes, thereby, enhancing the immune mediated anti-tumor response. In each of these areas, we are seeking to unlock the biology of cellular metabolism as a platform to create transformative therapies. We are located in Cambridge, Massachusetts.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Basis of presentation</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> The condensed consolidated balance sheet as of March&#xA0;31, 2017, and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March&#xA0;31, 2017 and 2016, are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of March&#xA0;31, 2017, and our results of operations and cash flows for the three months ended March&#xA0;31, 2017 and 2016. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three-month period are also unaudited. The results of operations for the three months ended March&#xA0;31, 2017 are not necessarily indicative of the results to be expected for the year ending December&#xA0;31, 2017 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 our Annual Report on Form&#xA0;10-K for the year ended December&#xA0;31, 2016 that was filed with the Securities and Exchange Commission, or the SEC, on February&#xA0;16, 2017.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Our consolidated financial statements include our accounts and the accounts of our 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.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Liquidity</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In April 2017, we completed a public offering of 5,050,505 shares of common stock at an offering price of $49.50 per share. We received net proceeds from this offering of $235.0 million, after deducting underwriting discounts and commissions paid by us. In addition, we granted the underwriters the right to purchase up to an additional 757,575 shares of common stock, which was also exercised in April 2017, resulting in additional net proceeds to us of $35.2 million, after underwriting discounts and commissions. After giving effect to the full exercise of the over-allotment option, the total number of shares sold by us in the public offering increased to 5,808,080 shares, and net proceeds to us increased to $270.2 million, after underwriting discounts and commissions.</p> </div> 0 -74074000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The following table presents RSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="65%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number&#xA0;of</b><br /> <b>Stock&#xA0;Units</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b><font style="WHITE-SPACE: nowrap">Weighted-average</font></b><br /> <b>grant&#xA0;date&#xA0;fair&#xA0;value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at December&#xA0;31, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">77,050</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">49.60</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">57,100</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">50.40</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(7,300</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">39.76</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">126,850</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">50.52</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 24000 293000 142539 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> Marketable securities at March&#xA0;31, 2017 consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="59%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized&#xA0;Cost</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Gains</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Losses</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Fair</b><br /> <b>Value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,240</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,242</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,599</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(66</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">82,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">17,519</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(22</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">17,497</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168,282</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(74</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168,208</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Non-current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,760</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(13</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,748</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,500</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(7</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,493</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,215</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(37</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">16,182</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">303,115</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(221</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">302,903</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Marketable securities at December&#xA0;31, 2016 consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="58%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized&#xA0;Cost</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Gains</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Unrealized</b><br /> <b>Losses</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Fair</b><br /> <b>Value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,280</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(3</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,279</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> U.S. Treasuries</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">141,678</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(62</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">141,618</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(23</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">19,510</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">208,285</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(135</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">208,153</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Non-current:</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Certificates of deposit</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,600</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(13</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">7,593</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,499</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(21</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,478</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Corporate debt securities</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,248</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(69</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,179</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">413,123</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">13</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(326</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">412,810</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> The following table presents PSU activity for the three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="65%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number&#xA0;of</b><br /> <b>Stock&#xA0;Units</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b><font style="WHITE-SPACE: nowrap">Weighted-average</font></b><br /> <b>grant&#xA0;date&#xA0;fair&#xA0;value</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at December&#xA0;31, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">200,613</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">53.36</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Unvested shares at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">200,613</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">53.36</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,318,350</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Restricted stock units</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">126,850</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">73,800</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Employee stock purchase plan options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,533</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">4,227</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,262,177</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,396,377</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="81%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Three&#xA0;Months&#xA0;Ended</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March&#xA0;31,</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Research and development expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,025</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,528</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> General and administrative expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,709</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">3,579</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,734</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,107</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 49.85 66.24 21.56 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b>2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <b><i>Significant accounting policies</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> On January&#xA0;1, 2017, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No.&#xA0;2016-09, <i>Compensation&#x2014;Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting</i>, or 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. The following summarizes the effects of the adoption on our unaudited condensed consolidated financial statements:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Income taxes &#x2013;</i> Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We did not recognize any discrete adjustments to income tax expense for the three months ended March&#xA0;31, 2017, as we are in a full valuation allowance position. We have applied the modified retrospective adoption approach beginning in 2017. This cumulative-effect adjustment related to tax assets that had previously arisen from tax deductions for stock-based compensation expenses that were greater than the compensation recognized for financial reporting. These assets had been excluded from the deferred tax assets and liabilities totals on the balance sheet as a result of certain realization requirements previously included in Accounting Standards Codification, or ASC, 718, <i>Compensation&#x2014;Stock Compensation</i>. We recorded a cumulative-effect adjustment of approximately $32.7 million through retained earnings and deferred tax assets; however, due to the full valuation allowance, the only impact of the retrospective adoption is footnote presentation which will be presented in the December&#xA0;31, 2017 year-end financials.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <i>Forfeitures &#x2013;</i> Upon adoption of ASU 2016-09, entities may also elect to estimate forfeitures and adjust the estimate when it is likely to change, which is consistent with pre-ASU 2016-09 guidance, or account for forfeitures as they occur. Beginning in January&#xA0;1, 2017, we elected to account for forfeitures as they occur. The ASU is applied on a prospective basis, and prior periods have not been adjusted to reflect this change in accounting policy. The cumulative effect of the change in forfeiture policy in prior periods did not have a material impact of on our statement of operations or balance sheet.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> Upon adoption, no other aspects of ASU 2016-09 had a material effect on our unaudited condensed consolidated financial statements or related footnote disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> There have been no other material changes to the significant accounting policies previously disclosed in the Annual Report on Form&#xA0;10-K for the year ended December&#xA0;31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> <b><i>Recent accounting pronouncements</i></b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> <i>Revenue from Contracts with Customers</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In May 2014, the FASB issued ASU No.&#xA0;2014-09, <i>Revenue from Contracts with Customers (Topic 606)</i>, or ASU 2014-09. Subsequently, the FASB issued ASU 2015-14, <i>Revenue from Contracts with Customers (Topic 606)</i>, which adjusted the effective date of ASU 2014-09; ASU No.&#xA0;2016-08, <i>Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)</i>, which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No.&#xA0;2016-10, <i>Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,</i> which clarifies identifying performance obligations and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No.&#xA0;2016-12, <i>Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients</i>, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, or collectively, the Revenue ASUs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> The Revenue ASUs provide an accounting standard 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&#xA0;15, 2017, with an option to early adopt for interim and annual periods beginning after December&#xA0;15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We are in process of initiating our overall implementation plan and evaluation of the impact of the new standard on our accounting policies. We will adopt the new standard effective January&#xA0;1, 2018 under the modified retrospective method. We are in the process of determining the impact of the Revenue ASUs on our financial statements; however, the adoption of the Revenue ASUs may have a material impact on revenue recognition, our notes to consolidated financial statements and our internal controls over financial reporting.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i>Other Recent Accounting Pronouncements</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> In October 2016, the FASB issued ASU No.&#xA0;2016-16, <i>Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory</i>, or ASU 2016-16, which removes the prohibition in ASC 740, <i>Income Taxes</i>, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for us for annual periods beginning after December&#xA0;15, 2017, and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> In February 2016, the FASB issued ASU No.&#xA0;2016-02,<i>&#xA0;Leases (Topic 842),</i> or 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&#xA0;15, 2018 and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> 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 our financial statements upon adoption.</p> </div> AGIO 62732000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> Accrued expenses consist of the following (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="72%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>March&#xA0;31,<br /> 2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,<br /> 2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued compensation</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,285</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">11,092</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued research and development costs</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">13,474</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">20,266</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued professional fees</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,060</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">476</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Accrued other</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,295</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">25,114</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">32,002</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 100000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt"> During the three months ended March&#xA0;31, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0"> <tr> <td width="77%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2017</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,902</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">8,564</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Restricted stock units</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">595</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">359</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Performance-based stock options</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Employee Stock Purchase Plan</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">237</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">138</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,734</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">9,107</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt"> The following table summarizes all stock option activity for three months ended March&#xA0;31, 2017:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="74%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number&#xA0;of</b><br /> <b>Stock&#xA0;Options</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted-</b><br /> <b>Average</b><br /> <b>Exercise</b><br /> <b>Price</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding at December&#xA0;31, 2016</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">5,218,880</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">46.79</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Granted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,129,352</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">49.85</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercised</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(142,539</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">21.56</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Forfeited/expired</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(75,899</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">66.24</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Outstanding at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">47.70</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Exercisable at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">2,909,093</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">37.76</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; PAGE-BREAK-INSIDE: avoid" bgcolor="#CCEEFF"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Vested and expected to vest at March&#xA0;31, 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">6,129,794</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">47.70</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 1129352 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0"> <tr> <td width="32%"></td> <td valign="bottom" width="3%"></td> <td width="44%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; 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Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q1  
Trading Symbol AGIO  
Entity Registrant Name AGIOS PHARMACEUTICALS INC  
Entity Central Index Key 0001439222  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   48,204,878
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 200,278 $ 160,754
Marketable securities 279,480 380,560
Collaboration receivable - related party 11,265 4,886
Tenant improvement and other receivables 3,452 3,428
Prepaid expenses and other current assets 12,391 10,264
Total current assets 506,866 559,892
Marketable securities 23,423 32,250
Property and equipment, net 24,139 25,337
Other non-current assets 2,888 1,615
Total assets 557,316 619,094
Current liabilities:    
Accounts payable 16,152 17,106
Accrued expenses 25,114 32,002
Deferred revenue - related party 37,690 35,913
Deferred rent 3,473 3,412
Total current liabilities 82,429 88,433
Deferred revenue, net of current portion - related party 150,596 154,297
Deferred rent, net of current portion 16,911 17,773
Stockholders' equity:    
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2017 and December 31, 2016
Common stock, $0.001 par value; 125,000,000 shares authorized; 42,382,901 and 42,220,444 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively 42 42
Additional paid-in capital 857,107 842,013
Accumulated other comprehensive loss (212) (313)
Accumulated deficit (549,557) (483,151)
Total stockholders' equity 307,380 358,591
Total liabilities and stockholders' equity $ 557,316 $ 619,094
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 25,000,000 25,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 125,000,000 125,000,000
Common stock, shares issued 42,382,901 42,220,444
Common stock, shares outstanding 42,382,901 42,220,444
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]    
Collaboration revenue - related party $ 10,508 $ 31,281
Operating expenses:    
Research and development (net of $2,776 and $8,794 of cost reimbursement from related party for the three months ended March 31, 2017 and 2016, respectively) 62,732 44,038
General and administrative 14,823 10,837
Total operating expenses 77,555 54,875
Loss from operations (67,047) (23,594)
Interest income 881 396
Net loss $ (66,166) $ (23,198)
Net loss per share - basic and diluted $ (1.56) $ (0.61)
Weighted-average number of common shares used in computing net loss per share - basic and diluted 42,280,525 37,864,084
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Research and development expense [Member]    
Cost reimbursement from related party $ 2,776 $ 8,794
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]    
Net loss $ (66,166) $ (23,198)
Other comprehensive income:    
Unrealized gain on available-for-sale securities 101 407
Comprehensive loss $ (66,065) $ (22,791)
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating activities    
Net loss $ (66,166) $ (23,198)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 1,591 1,246
Stock-based compensation expense 10,734 9,107
Net amortization of premium and discounts on investments 163 126
Loss on disposal of fixed assets 40  
Changes in operating assets and liabilities:    
Collaboration receivable - related party (6,379) 1,411
Tenant improvement and other receivables (24) 2,803
Prepaid expenses and other current and non-current assets (3,425) (857)
Accounts payable (994) (293)
Accrued expenses and other liabilities (6,889) (2,902)
Deferred revenue - related party (1,924) (5,892)
Deferred rent (801) (560)
Net cash used in operating activities (74,074) (19,009)
Investing activities    
Purchases of marketable securities (26,740) (211,163)
Proceeds from maturities and sales of marketable securities 136,585 198,868
Purchases of property and equipment (293) (2,533)
Net cash provided by (used in) investing activities 109,552 (14,828)
Financing activities    
Payment of public offering costs (100)  
Net proceeds from stock option exercises and employee stock purchase plan 4,146 1,108
Net cash provided by financing activities 4,046 1,108
Net change in cash and cash equivalents 39,524 (32,729)
Cash and cash equivalents at beginning of the period 160,754 71,764
Cash and cash equivalents at end of the period 200,278 39,035
Supplemental disclosure of non-cash investing and financing transactions    
Additions to property and equipment in accounts payable and accrued expenses 213 607
Proceeds from stock option exercises in other current assets 6 $ 17
Public offering costs in other current assets $ 329  
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Overview and Basis of Presentation
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Overview and Basis of Presentation

1. Overview and Basis of Presentation

References to Agios

Throughout this Quarterly Report on Form 10-Q, “we,” “us,” and “our,” and similar expressions, except where the context requires otherwise, refer to Agios Pharmaceuticals, Inc. and its consolidated subsidiaries, and “our Board of Directors” refers to the board of directors of Agios Pharmaceuticals, Inc.

Overview

We are a biopharmaceutical company committed to the fundamental transformation of patients’ lives through scientific leadership in the field of cellular metabolism, with the goal of making transformative, first- or best-in-class medicines. Our areas of focus are cancer metabolism, rare genetic diseases, or RGDs, which are diseases that are directly caused by changes in genes or chromosomes, often passed from one generation to the next, and metabolic immuno-oncology, or MIO, which is a developing field that aims to modulate the activity of relevant immune cells (or tumor microenvironment) by targeting critical metabolic nodes, thereby, enhancing the immune mediated anti-tumor response. In each of these areas, we are seeking to unlock the biology of cellular metabolism as a platform to create transformative therapies. We are located in Cambridge, Massachusetts.

Basis of presentation

The condensed consolidated balance sheet as of March 31, 2017, and the condensed consolidated statements of operations, comprehensive loss and cash flows for the three months ended March 31, 2017 and 2016, are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of March 31, 2017, and our results of operations and cash flows for the three months ended March 31, 2017 and 2016. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three-month period are also unaudited. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 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 our Annual Report on Form 10-K for the year ended December 31, 2016 that was filed with the Securities and Exchange Commission, or the SEC, on February 16, 2017.

Our consolidated financial statements include our accounts and the accounts of our 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.

Liquidity

In April 2017, we completed a public offering of 5,050,505 shares of common stock at an offering price of $49.50 per share. We received net proceeds from this offering of $235.0 million, after deducting underwriting discounts and commissions paid by us. In addition, we granted the underwriters the right to purchase up to an additional 757,575 shares of common stock, which was also exercised in April 2017, resulting in additional net proceeds to us of $35.2 million, after underwriting discounts and commissions. After giving effect to the full exercise of the over-allotment option, the total number of shares sold by us in the public offering increased to 5,808,080 shares, and net proceeds to us increased to $270.2 million, after underwriting discounts and commissions.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies and Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies and Recent Accounting Pronouncements

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Significant accounting policies

On January 1, 2017, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or 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. The following summarizes the effects of the adoption on our unaudited condensed consolidated financial statements:

Income taxes – Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We did not recognize any discrete adjustments to income tax expense for the three months ended March 31, 2017, as we are in a full valuation allowance position. We have applied the modified retrospective adoption approach beginning in 2017. This cumulative-effect adjustment related to tax assets that had previously arisen from tax deductions for stock-based compensation expenses that were greater than the compensation recognized for financial reporting. These assets had been excluded from the deferred tax assets and liabilities totals on the balance sheet as a result of certain realization requirements previously included in Accounting Standards Codification, or ASC, 718, Compensation—Stock Compensation. We recorded a cumulative-effect adjustment of approximately $32.7 million through retained earnings and deferred tax assets; however, due to the full valuation allowance, the only impact of the retrospective adoption is footnote presentation which will be presented in the December 31, 2017 year-end financials.

Forfeitures – Upon adoption of ASU 2016-09, entities may also elect to estimate forfeitures and adjust the estimate when it is likely to change, which is consistent with pre-ASU 2016-09 guidance, or account for forfeitures as they occur. Beginning in January 1, 2017, we elected to account for forfeitures as they occur. The ASU is applied on a prospective basis, and prior periods have not been adjusted to reflect this change in accounting policy. The cumulative effect of the change in forfeiture policy in prior periods did not have a material impact of on our statement of operations or balance sheet.

Upon adoption, no other aspects of ASU 2016-09 had a material effect on our unaudited condensed consolidated financial statements or related footnote disclosures.

There have been no other material changes to the significant accounting policies previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016.

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. Subsequently, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligations and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, or collectively, the Revenue ASUs.

The Revenue ASUs provide an accounting standard 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, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We are in process of initiating our overall implementation plan and evaluation of the impact of the new standard on our accounting policies. We will adopt the new standard effective January 1, 2018 under the modified retrospective method. We are in the process of determining the impact of the Revenue ASUs on our financial statements; however, the adoption of the Revenue ASUs may have a material impact on revenue recognition, our notes to consolidated financial statements and our internal controls over financial reporting.

Other Recent Accounting Pronouncements

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, or ASU 2016-16, which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for us for annual periods beginning after December 15, 2017, and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or 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. We are currently in the process of evaluating the impact of the guidance on our 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 our financial statements upon adoption.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements

3. Fair Value Measurements

We record cash equivalents and marketable securities at fair value. 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 our own assumptions (unobservable inputs). The hierarchy consists of three levels:

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

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

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

The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of March 31, 2017 (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Cash equivalents

   $ 178,663      $ 19,985      $ —        $ 198,648  

Marketable securities:

           

Certificates of deposit

     —          15,990        —          15,990  

U.S. Treasuries

     82,533        —          —          82,533  

Government securities

     12,497        7,493        —          19,990  

Corporate debt securities

     —          184,390        —          184,390  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 273,693      $ 227,858      $ —        $ 501,551  
  

 

 

    

 

 

    

 

 

    

 

 

 

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 our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2017.

There have been no changes to the valuation methods during the three months ended March 31, 2017. We evaluate 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 months ended March 31, 2017. We have no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March 31, 2017.

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Marketable Securities
3 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities

4. Marketable Securities

Marketable securities at March 31, 2017 and December 31, 2016 consisted of investments in certificates of deposit, U.S. Treasuries, government securities and corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our marketable securities as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities. Marketable securities are recorded at fair value, 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 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 three months ended March 31, 2017 and 2016 and, as a result, we did not reclassify any amounts out of accumulated other comprehensive loss for the periods.

Marketable securities at March 31, 2017 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,240      $ 4      $ (2    $ 11,242  

U.S Treasuries

     82,599        —          (66      82,533  

Government securities

     17,519        —          (22      17,497  

Corporate debt securities

     168,282        —          (74      168,208  

Non-current:

           

Certificates of deposit

     4,760        1        (13      4,748  

Government securities

     2,500        —          (7      2,493  

Corporate debt securities

     16,215        4        (37      16,182  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 303,115      $ 9      $ (221    $ 302,903  
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable securities at December 31, 2016 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,280      $ 2      $ (3    $ 11,279  

U.S. Treasuries

     141,678        2        (62      141,618  

Government securities

     19,533        —          (23      19,510  

Corporate debt securities

     208,285        3        (135      208,153  

Non-current:

           

Certificates of deposit

     7,600        6        (13      7,593  

Government securities

     4,499        —          (21      4,478  

Corporate debt securities

     20,248        —          (69      20,179  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 413,123      $ 13      $ (326    $ 412,810  
  

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2017 and December 31, 2016, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of one to two years, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and therefore classified as available-for-sale.

We review marketable securities for 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 statements of operations if we experienced a credit loss, have the intent to sell the marketable security, or if it is more likely than not that we 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 our investment policy, the severity and the duration of the impairment, and changes in value subsequent to the end of the period.

At March 31, 2017 and December 31, 2016, we held 123 and 158 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 March 31, 2017 and December 31, 2016 was $241.8 million and $335.4 million, respectively. There were no individual securities that were in a significant unrealized loss position as of March 31, 2017 and December 31, 2016. We evaluated our 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 we will be required to sell the securities, and we do 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 March 31, 2017 and December 31, 2016.

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Celgene Collaboration Agreements
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Celgene Collaboration Agreements

5. Celgene Collaboration Agreements

To date, our revenue has primarily been generated from our collaboration agreements with Celgene, or collectively, the Collaboration Agreements. Celgene is a related party through ownership of our common stock. In April 2010, we entered into a collaboration agreement focused on cancer metabolism. The agreement was amended in October 2011 and July 2014, or collectively the agreement together with the amendments, the 2010 Agreement. 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, entered into a collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the development and commercialization of AG-881 products. On May 17, 2016, we entered into a master research and collaboration agreement, or the 2016 Agreement.

2016 Agreement

In May 2016, we entered into the 2016 Agreement focused on MIO. In addition to new programs identified under the 2016 Agreement, both parties have also agreed that all future development and commercialization of two remaining cancer metabolism programs discovered under the 2010 Agreement, including AG-270, a program focused on methylthioadenosine phosphorylase, or MTAP, deleted cancers, 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, and may be extended 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 the 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. We may conduct further research and pre-clinical and clinical development activities on any continuation program, at our expense, through the completion of an initial phase 1 dose escalation study.

We granted Celgene the right to obtain exclusive options for 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: (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 it does not exercise its option.

Under the terms of the 2016 Agreement, following Celgene’s exercise of its option with respect to a program, the parties 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-commercialization agreement, the two parties 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, the parties 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, the parties 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 in the IO field. 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, we and Celgene will alternate, on a program-by-program basis, being the lead party for the United States, with us having the right to be the lead party for the first such program, and each party will 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, we received an initial upfront payment in the amount of $200.0 million. The 2016 Agreement provides specified rights to extend the research term for up to two, or in specified cases, up to four, additional years by paying a $40.0 million per-year extension fee. Celgene will pay an $8.0 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 $30.0 million for any designated development program and at least $35.0 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 $10.0 million.

We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:

 

Program

  

Milestone

   Amount  
65/35 program in IO field    Specified clinical development event      $25.0 million  
65/35 program in IO field    Specified regulatory milestone events      Up to $183.8 million  
50/50 program in IO field    Specified clinical development event      $20.0 million  
50/50 program in IO field    Specified regulatory milestone events      Up to $148.8 million  
I&I field    Specified clinical development event      $25.0 million  
I&I field    Specified regulatory milestone events      Up to $236.3 million  
I&I field    Specified commercial milestone events      Up to $125.0 million  

Additionally, for each licensed program in the I&I field, we are eligible to receive royalties at tiered, low double-digit percentage rates on Celgene’s net sales, if any.

Opt-out right

Under the 2016 Agreement, we 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 we will undertake transitional activities reasonably necessary to transfer the development, manufacture and commercialization of such licensed products to Celgene, at our expense. Further, in lieu of the profit or loss sharing described above, we 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, we 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 the 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 us 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 their 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, we may not directly or indirectly develop, manufacture or commercialize, outside of the 2016 Agreement, any therapeutic modality in the IO or 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 we 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, we entered into a letter agreement with Celgene regarding ivosidenib, or the AG-120 Letter Agreement. Under the AG-120 Letter Agreement, the parties agreed to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the isocitrate dehydrogenase 1, or IDH1, target, for which ivosidenib 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 obtained global rights to ivosidenib and the IDH1 program. Neither party will have any further financial obligation, including royalties or milestone payments, to the other concerning ivosidenib or the IDH1 program. Under the terms of the termination, 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 termination does not affect the AG-881 Agreements, which are directed to both the IDH1 target and the isocitrate dehydrogenase 2, or IDH2, target.

AG-881 Agreements

On April 27, 2015, we entered into the AG-881 Agreements. The AG-881 Agreements establish a joint worldwide collaboration focused on the development and commercialization of AG-881 products. Under the terms of the AG-881 Agreements, we received an initial upfront payment of $10.0 million in May 2015 and are eligible to receive milestone-based payments described below. The parties will split all worldwide development costs equally, subject to specified exceptions, as well as any profits from any net sales of, or commercialization losses related to, licensed AG-881 products.

We are 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 a first NDA in a major market and (ii) up to $55.0 million in milestone payments upon achievement of specified regulatory milestone events. We may also receive royalties at tiered, low- to mid-teen percentage rates on net sales if we elect not to participate in the development and commercialization of AG-881.

2010 Agreement

In April 2010, we entered into the 2010 Agreement, which was amended in October 2011 and July 2014. The goal of the collaboration was to discover, develop and commercialize disease-altering therapies in oncology based on our cancer metabolism research platform. We initially led 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.

Upon agreement to terminate the 2010 Agreement, effective as of August 15, 2016, as to the program directed to the IDH1 target, for which ivosidenib is the lead development candidate, the sole program remaining under the 2010 Agreement is IDHIFA® (enasidenib), a co-commercialized licensed program for which Celgene leads and funds global development and commercialization activities. We have exercised our right to participate in a portion of commercialization activities in the United States for IDHIFA® (enasidenib) in accordance with the applicable commercialization plan.

Under the remaining terms of the 2010 Agreement, we are eligible to receive up to $95.0 million in potential milestone payments for the IDHIFA® (enasidenib) program. The potential milestone payments are comprised of: (i) up to $70.0 million in milestone payments upon achievement of specified ex-U.S. regulatory milestone events and (ii) a $25.0 million milestone payment upon achievement of a specified commercial milestone event.

Under the 2010 Agreement, we may also receive royalties at tiered, low-double digit to mid-teen percentage rates on net sales and have the option to participate in the development and commercialization of certain products in the United States. Assuming all other revenue recognition criteria are met, royalty payments will be recognized as revenue in the period in which they are earned. To date, we have 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 all royalty terms with respect to IDHIFA® (enasidenib). Celgene may terminate this agreement for convenience in its entirety upon ninety days written notice to us. 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. Either party may terminate the agreement in the event of specified insolvency events involving the other party.

Accounting analysis and revenue recognition – collaboration revenue

April 2015 – May 2016

The AG-881 Agreements 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, under the provisions of ASC 605-25, Multiple Element Arrangements, we identified the remaining deliverables under the 2010 Agreement and the AG-881 Agreements, and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 our best estimate of selling price for each unit of accounting. The undelivered items, which are each considered by us 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: We 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. Our 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. We developed a best estimate of selling price of the licenses of $33.2 million. We recognize 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 three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.9 million as collaboration revenue.

 

    Four separate on-going development services for which we determined we are acting as the principal of all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all four of the on-going development services of $12.7 million using our 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 our 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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, Revenue Recognition – Principal Agent Considerations, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. During the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $1.0 million as collaboration revenue.

 

    Four separate on-going development services for which we determined we are not acting as the principal of all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all four of the on-going development services of $97.3 million using our 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 our 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. We expect the services to be performed through 2017. When considering the factors included within ASC 605-45, we determined we are not the principal of all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. During the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to these units of accounting of $4.8 million as a reduction of research and development costs related to these services.

 

   

On-going research and development: We developed the best estimate of selling price of the research and development services of $30.5 million using our 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. For the three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $3.6 million as collaboration revenue.

 

    Committee participations under the 2010 Agreement and AG-881 Agreements: We developed the best estimate of selling price of the committee participation services of $0.8 million using our 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 three months ended March 31, 2016, we recognized the non-contingent consideration allocated to this unit of accounting of $0.1 million as collaboration revenue.

As a result of Celgene assuming the primary development responsibilities for IDHIFA® (enasidenib) in the first quarter of 2015, we recorded $0.5 million of third-party costs incurred on behalf of Celgene during the three months ended March 31, 2016 as a reduction of research and development costs.

Beginning in the third quarter of 2015, we initiated a phase 1b frontline combination clinical trial of IDHIFA® (enasidenib) and ivosidenib for which we 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, we determined that we are the principal for the efforts related to the IDHIFA® (enasidenib) arm of the combination trial but are the agent for the efforts related to the ivosidenib arm of the combination trial. Accordingly, consideration earned related to the IDHIFA® (enasidenib) arm of the combination trial is recognized as collaboration revenue in the period earned, and consideration earned related to the ivosidenib arm of the combination trial is reported as a reduction of research and development expense in the period earned. During the three months ended March 31, 2016, we recognized $0.7 million in collaboration revenue and $0.2 million as a reduction of research and development costs related to the combination trial.

During the three months ended March 31, 2016, we incurred an additional $3.3 million in reimbursable development expenses related to the ivosidenib 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 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, we identified the undelivered elements under the Collaboration Agreements and determined the best estimate of selling price for the undelivered elements as of the modification date. We 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 Collaboration Agreements that were deemed to be determinable at the modification date, to each unit of accounting relative to its best estimate of selling price. During the three months ended March 31, 2017, we received $8.0 million from Celgene upon the designation of AG-270, our program focused on MTAP-deleted cancers, as a development candidate. This payment is contingent consideration and is allocated to each unit of accounting, discussed below, relative to its best estimate of selling price. The undelivered items, which are each considered by us 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 we determined we are acting as the principal for all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all three of the development services of $67.8 million using our 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 our 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. We expect the services to be performed through 2019. When considering the factors included within ASC 605-45, we determined we are the principal for all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March 31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $3.7 million as collaboration revenue.

 

   

Three separate on-going development services for which we determined we are not acting as the principal for all development activities (each of which is a separate unit of accounting): We developed the best estimate of selling price for all three development services of $22.4 million using our 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 our 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. We expect the services to be performed through 2019. When considering the factors included within ASC 605-45, we determined we are not the principal for all development activities and are required to present reimbursement of amounts incurred for these services on a net basis as a reduction of research and development expenses. For the three months ended March 31, 2017, we recognized the non-contingent consideration allocated to these units of accounting of $2.8 million as a reduction of research and development costs related to these services.

 

    On-going research and development: We developed the best estimate of selling price of the research and development services of $207.0 million using our 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 three months ended March 31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of $6.6 million as collaboration revenue.

 

    Committee participations under the 2010 Agreement, AG-881 Agreements and 2016 Agreement: We developed the best estimate of selling price of the committee participation services of $1.5 million using our 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 three months ended March 31, 2017, we recognized the non-contingent consideration allocated to this unit of accounting of less than $0.1 million as collaboration revenue.

 

    Additional development activities for which we determined we are acting as the principal of all development activities: We developed the best estimate of selling price of the development service of $48.7 million using our 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 our 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, we determined we are the principal of all development activities and are required to present reimbursement of amounts incurred for these services as revenue. For the three months ended March 31, 2017, we did not recognize any revenue associated with this unit of account.

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 we perform certain services for which we are 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 we receive less reimbursement than initially estimated.

During the three months ended March 31, 2017 and 2016, we recognized a total of $10.5 million and $31.3 million, respectively, as collaboration revenue and recognized $2.8 million and $8.8 million, respectively, as a reduction of research and development expenses. As of March 31, 2017 and December 31, 2016, we recorded a collaboration receivable of $11.3 million and $4.9 million, respectively, related to reimbursable development costs.

In determining the current and noncurrent classification of deferred revenue, we consider 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.

Accounting analysis and revenue recognition – milestone revenue

We concluded that certain milestone payments that may be received under the Collaboration Agreements are substantive. Factors considered in the evaluation of the milestones included an assessment of whether: (i) the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) the consideration relates solely to past performance, and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the Collaboration Agreements. Revenue from substantive milestones is recognized as revenue in its entirety upon successful accomplishment of the milestones, assuming all other revenue recognition criteria are met. Milestones not deemed substantive, are allocated to each unit of accounting, discussed above, relative to our best estimate of selling price for each unit of accounting and recognized on a proportional performance basis or ratably over the expected period of performance.

In January 2016, a substantive clinical development milestone related to the IDHIFA® (enasidenib) program under the 2010 Agreement was achieved and we 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 three months ended March 31, 2017 and 2016. The next potential milestones expected to be achieved under the Collaboration Agreements relate to specified ex-U.S. regulatory events. Achievement of these events will result in milestone payments of up to $70.0 million. Additionally, the next potential payment we expect to receive under the Collaboration Agreements is related to Celgene’s exercise of its option to develop and commercialize AG-270, the program focused on MTAP-deleted cancers. This exercise will result in a license fee of at least $30.0 million.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses
3 Months Ended
Mar. 31, 2017
Payables and Accruals [Abstract]  
Accrued Expenses

6. Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

     March 31,
2017
     December 31,
2016
 

Accrued compensation

   $ 5,285      $ 11,092  

Accrued research and development costs

     13,474        20,266  

Accrued professional fees

     5,060        476  

Accrued other

     1,295        168  
  

 

 

    

 

 

 

Total

   $ 25,114      $ 32,002  
  

 

 

    

 

 

 
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments
3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Payments

7. Share-Based Payments

2013 Stock Incentive Plan

In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our Initial Public Offering, or IPO, and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based stock awards, or PSUs, and other stock-based awards. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of March 31, 2017, the total number of shares reserved under the 2007 Plan and the 2013 Plan are 7,802,377, and we had 1,345,120 shares available for future issuance under such plans.

The following table summarizes all stock option activity for three months ended March 31, 2017:

 

     Number of
Stock Options
     Weighted-
Average
Exercise
Price
 

Outstanding at December 31, 2016

     5,218,880      $ 46.79  

Granted

     1,129,352        49.85  

Exercised

     (142,539      21.56  

Forfeited/expired

     (75,899      66.24  
  

 

 

    

 

 

 

Outstanding at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 

Exercisable at March 31, 2017

     2,909,093      $ 37.76  
  

 

 

    

 

 

 

Vested and expected to vest at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 

At March 31, 2017, the total unrecognized compensation expense related to unvested stock option awards was $104.5 million, which we expect to recognize over a weighted-average period of approximately 2.68 years.

Restricted stock units

We may grant awards of RSUs to non-employee directors 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 our common stock.

The following table presents RSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     77,050      $ 49.60  

Granted

     57,100        50.40  

Vested

     —          —    

Forfeited/expired

     (7,300      39.76  
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     126,850      $ 50.52  
  

 

 

    

 

 

 

 

As of March 31, 2017, there was approximately $4.2 million of total unrecognized compensation expense related to RSUs, which we expect to be recognized over a weighted-average period of 1.5 years.

Performance-based stock options

During the three months ended March 31, 2017 and 2016, 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 us. However, certain performance-based stock options issued in prior periods were still outstanding as of March 31, 2017. Performance-based vesting criteria for options primarily relate to milestone events specific to our corporate goals, including but not limited to certain preclinical, clinical and regulatory development milestones related to our 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 our management’s best estimates. As of March 31, 2017, all performance-based milestones had been achieved.

Performance-based stock units

We may grant awards of PSUs to non-employee directors and employees on a discretionary basis pursuant to the 2013 Plan. Each PSU entitles the holder to receive, at the achievement of the performance-based and service-based criteria, a specified number of shares of our stock. Performance-based vesting criteria primarily relate to milestone events specific to our corporate goals, specifically regulatory development milestones related to our product candidates.

The following table presents PSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     200,613      $ 53.36  

Granted

     —          —    

Vested

     —          —    

Forfeited/expired

     —          —    
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     200,613      $ 53.36  
  

 

 

    

 

 

 

Stock-based compensation expense associated with these PSUs is recognized if the performance condition is considered probable of achievement using our management’s best estimates. As of March 31, 2017, there was approximately $10.7 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are not considered probable of achievement.

2013 Employee Stock Purchase Plan

In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. The 2013 ESPP is administered by our Board of Directors or by a committee appointed by our 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 our common stock at the beginning or end of the offering period, whichever is lower, subject to Internal Revenue Service limits. We issued 33,521 shares and 12,327 shares during the three months ended March 31, 2017 and 2016, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 327,272 shares of our common stock. As of March 31, 2017, we had 239,921 shares available for future issuance under the 2013 ESPP.

 

Stock-based compensation expense

During the three months ended March 31, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):

 

     Three Months Ended March 31,  
     2017      2016  

Stock options

   $ 9,902      $ 8,564  

Restricted stock units

     595        359  

Performance-based stock options

     —          46  

Employee Stock Purchase Plan

     237        138  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 

Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):

 

    

Three Months Ended

March 31,

 
     2017      2016  

Research and development expense

   $ 7,025      $ 5,528  

General and administrative expense

     3,709        3,579  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
3 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

8. Income Taxes

There was no (benefit) provision for income taxes during the three months ended March 31, 2017 and 2016.

We account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. We evaluated whether any uncertain tax positions arise from commencing operations of our wholly owned subsidiary, Agios International Sarl, and determined no uncertain tax positions existed. As of March 31, 2017 and December 31, 2016, we did not have any uncertain tax positions recorded.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loss per Share
3 Months Ended
Mar. 31, 2017
Earnings Per Share [Abstract]  
Loss per Share

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, RSUs, unvested restricted stock and ESPP options are considered to be common stock equivalents. Furthermore, performance-based stock units with vesting conditions that were not met as of March 31, 2017 are excluded as common stock equivalents.

Since we had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share was 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 Months Ended March 31,  
     2017      2016  

Stock options

     6,129,794        5,318,350  

Restricted stock units

     126,850        73,800  

Employee stock purchase plan options

     5,533        4,227  
  

 

 

    

 

 

 
     6,262,177        5,396,377  
  

 

 

    

 

 

 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
Subsequent Events

10. Subsequent Events

On April 27, 2017, we entered into a global license agreement with Aurigene Discovery Technologies Limited, or Aurigene, to research, develop and commercialize small molecule inhibitors of an undisclosed cancer metabolism target, or the Aurigene Agreement. Under the terms of the Aurigene Agreement, Aurigene will provide us with exclusive rights to its portfolio of novel small molecules for the undisclosed target, and we will provide Aurigene a $3.0 million upfront payment and potential future milestone payments up to $17.0 million per licensed product if we achieve certain development and regulatory milestones. Aurigene is also eligible to receive low single-digit royalties on product sales. We will conduct preclinical studies and, if successful, fund further global research and development, as well as regulatory and commercial activities.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Significant accounting policies

On January 1, 2017, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or 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. The following summarizes the effects of the adoption on our unaudited condensed consolidated financial statements:

Income taxes – Upon adoption of this standard, all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are recognized as income tax expense or benefit in the statement of operations. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We did not recognize any discrete adjustments to income tax expense for the three months ended March 31, 2017, as we are in a full valuation allowance position. We have applied the modified retrospective adoption approach beginning in 2017. This cumulative-effect adjustment related to tax assets that had previously arisen from tax deductions for stock-based compensation expenses that were greater than the compensation recognized for financial reporting. These assets had been excluded from the deferred tax assets and liabilities totals on the balance sheet as a result of certain realization requirements previously included in Accounting Standards Codification, or ASC, 718, Compensation—Stock Compensation. We recorded a cumulative-effect adjustment of approximately $32.7 million through retained earnings and deferred tax assets; however, due to the full valuation allowance, the only impact of the retrospective adoption is footnote presentation which will be presented in the December 31, 2017 year-end financials.

Forfeitures – Upon adoption of ASU 2016-09, entities may also elect to estimate forfeitures and adjust the estimate when it is likely to change, which is consistent with pre-ASU 2016-09 guidance, or account for forfeitures as they occur. Beginning in January 1, 2017, we elected to account for forfeitures as they occur. The ASU is applied on a prospective basis, and prior periods have not been adjusted to reflect this change in accounting policy. The cumulative effect of the change in forfeiture policy in prior periods did not have a material impact of on our statement of operations or balance sheet.

Upon adoption, no other aspects of ASU 2016-09 had a material effect on our unaudited condensed consolidated financial statements or related footnote disclosures.

There have been no other material changes to the significant accounting policies previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2016.

Recent accounting pronouncements

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU 2014-09. Subsequently, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which adjusted the effective date of ASU 2014-09; ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal-versus-agent implementation guidance and illustrations in ASU 2014-09; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies identifying performance obligations and licensing implementation guidance and illustrations in ASU 2014-09; and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which addresses implementation issues and is intended to reduce the cost and complexity of applying the new revenue standard in ASU 2014-09, or collectively, the Revenue ASUs.

The Revenue ASUs provide an accounting standard 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, 2017, with an option to early adopt for interim and annual periods beginning after December 15, 2016. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). We are in process of initiating our overall implementation plan and evaluation of the impact of the new standard on our accounting policies. We will adopt the new standard effective January 1, 2018 under the modified retrospective method. We are in the process of determining the impact of the Revenue ASUs on our financial statements; however, the adoption of the Revenue ASUs may have a material impact on revenue recognition, our notes to consolidated financial statements and our internal controls over financial reporting.

Other Recent Accounting Pronouncements

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, or ASU 2016-16, which removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for us for annual periods beginning after December 15, 2017, and interim periods therein, with early adoption permitted. We are currently in the process of evaluating the impact of the guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or 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. We are currently in the process of evaluating the impact of the guidance on our 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 our financial statements upon adoption.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Cash Equivalents and Marketable Securities Measured at Fair Value on a Recurring Basis

The following table summarizes the cash equivalents and marketable securities measured at fair value on a recurring basis as of March 31, 2017 (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Cash equivalents

   $ 178,663      $ 19,985      $ —        $ 198,648  

Marketable securities:

           

Certificates of deposit

     —          15,990        —          15,990  

U.S. Treasuries

     82,533        —          —          82,533  

Government securities

     12,497        7,493        —          19,990  

Corporate debt securities

     —          184,390        —          184,390  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 273,693      $ 227,858      $ —        $ 501,551  
  

 

 

    

 

 

    

 

 

    

 

 

 
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Marketable Securities (Tables)
3 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities

Marketable securities at March 31, 2017 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,240      $ 4      $ (2    $ 11,242  

U.S Treasuries

     82,599        —          (66      82,533  

Government securities

     17,519        —          (22      17,497  

Corporate debt securities

     168,282        —          (74      168,208  

Non-current:

           

Certificates of deposit

     4,760        1        (13      4,748  

Government securities

     2,500        —          (7      2,493  

Corporate debt securities

     16,215        4        (37      16,182  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 303,115      $ 9      $ (221    $ 302,903  
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable securities at December 31, 2016 consist of the following (in thousands):

 

     Amortized Cost      Unrealized
Gains
     Unrealized
Losses
     Fair
Value
 

Current:

           

Certificates of deposit

   $ 11,280      $ 2      $ (3    $ 11,279  

U.S. Treasuries

     141,678        2        (62      141,618  

Government securities

     19,533        —          (23      19,510  

Corporate debt securities

     208,285        3        (135      208,153  

Non-current:

           

Certificates of deposit

     7,600        6        (13      7,593  

Government securities

     4,499        —          (21      4,478  

Corporate debt securities

     20,248        —          (69      20,179  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 413,123      $ 13      $ (326    $ 412,810  
  

 

 

    

 

 

    

 

 

    

 

 

 
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Celgene Collaboration Agreements (Tables)
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Milestone-Based Payments Associated With 2016 Agreement

We are eligible to receive the following milestone-based payments associated with the 2016 Agreement:

 

Program

  

Milestone

   Amount  
65/35 program in IO field    Specified clinical development event      $25.0 million  
65/35 program in IO field    Specified regulatory milestone events      Up to $183.8 million  
50/50 program in IO field    Specified clinical development event      $20.0 million  
50/50 program in IO field    Specified regulatory milestone events      Up to $148.8 million  
I&I field    Specified clinical development event      $25.0 million  
I&I field    Specified regulatory milestone events      Up to $236.3 million  
I&I field    Specified commercial milestone events      Up to $125.0 million  
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses (Tables)
3 Months Ended
Mar. 31, 2017
Payables and Accruals [Abstract]  
Summary of Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

     March 31,
2017
     December 31,
2016
 

Accrued compensation

   $ 5,285      $ 11,092  

Accrued research and development costs

     13,474        20,266  

Accrued professional fees

     5,060        476  

Accrued other

     1,295        168  
  

 

 

    

 

 

 

Total

   $ 25,114      $ 32,002  
  

 

 

    

 

 

 
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments (Tables)
3 Months Ended
Mar. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Company's Stock Option Activity

The following table summarizes all stock option activity for three months ended March 31, 2017:

 

     Number of
Stock Options
     Weighted-
Average
Exercise
Price
 

Outstanding at December 31, 2016

     5,218,880      $ 46.79  

Granted

     1,129,352        49.85  

Exercised

     (142,539      21.56  

Forfeited/expired

     (75,899      66.24  
  

 

 

    

 

 

 

Outstanding at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 

Exercisable at March 31, 2017

     2,909,093      $ 37.76  
  

 

 

    

 

 

 

Vested and expected to vest at March 31, 2017

     6,129,794      $ 47.70  
  

 

 

    

 

 

 
Unvested Stock Unit Activity

The following table presents RSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     77,050      $ 49.60  

Granted

     57,100        50.40  

Vested

     —          —    

Forfeited/expired

     (7,300      39.76  
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     126,850      $ 50.52  
  

 

 

    

 

 

 
Schedule of Performance-Based Units

The following table presents PSU activity for the three months ended March 31, 2017:

 

     Number of
Stock Units
     Weighted-average
grant date fair value
 

Unvested shares at December 31, 2016

     200,613      $ 53.36  

Granted

     —          —    

Vested

     —          —    

Forfeited/expired

     —          —    
  

 

 

    

 

 

 

Unvested shares at March 31, 2017

     200,613      $ 53.36  
  

 

 

    

 

 

 
Schedule of Stock-Based Compensation Expense by Award Type Included Within the Condensed Consolidated Statements of Operations

During the three months ended March 31, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):

 

     Three Months Ended March 31,  
     2017      2016  

Stock options

   $ 9,902      $ 8,564  

Restricted stock units

     595        359  

Performance-based stock options

     —          46  

Employee Stock Purchase Plan

     237        138  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 
Summary of Allocated Stock-Based Compensation Expense

Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):

 

    

Three Months Ended

March 31,

 
     2017      2016  

Research and development expense

   $ 7,025      $ 5,528  

General and administrative expense

     3,709        3,579  
  

 

 

    

 

 

 
   $ 10,734      $ 9,107  
  

 

 

    

 

 

 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loss per Share (Tables)
3 Months Ended
Mar. 31, 2017
Earnings Per Share [Abstract]  
Common Stock Excluded from Calculation of Diluted Earnings Per Share

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 Months Ended March 31,  
     2017      2016  

Stock options

     6,129,794        5,318,350  

Restricted stock units

     126,850        73,800  

Employee stock purchase plan options

     5,533        4,227  
  

 

 

    

 

 

 
     6,262,177        5,396,377  
  

 

 

    

 

 

 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Overview and Basis of Presentation - Additional Information (Detail) - Subsequent Event [Member]
$ / shares in Units, $ in Millions
1 Months Ended
Apr. 30, 2017
USD ($)
$ / shares
shares
Liquidity [Line Items]  
Number of shares issued from public offering | shares 5,808,080
Net proceeds from public offering | $ $ 270.2
Public Offering [Member]  
Liquidity [Line Items]  
Number of shares issued from public offering | shares 5,050,505
Offering price per share | $ / shares $ 49.50
Net proceeds from public offering | $ $ 235.0
Over-Allotment Option [Member]  
Liquidity [Line Items]  
Number of shares issued from public offering | shares 757,575
Net proceeds from public offering | $ $ 35.2
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies and Recent Accounting Pronouncements - Additional Information (Detail)
$ in Millions
3 Months Ended
Mar. 31, 2017
USD ($)
ASU 2016-09 [Member]  
Significant Of Accounting Policies [Line Items]  
Cumulative-effect adjustment through retained earnings and deferred tax assets $ 32.7
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair value measurements - Cash Equivalents and Marketable Securities Measured at Fair Value on a Recurring Basis (Detail)
$ in Thousands
Mar. 31, 2017
USD ($)
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Cash equivalents $ 198,648
Cash equivalents and marketable securities, total 501,551
Certificates of Deposit [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 15,990
U.S. Treasuries [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 82,533
Government Securities [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 19,990
Corporate Debt Securities [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 184,390
Level 1 [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Cash equivalents 178,663
Cash equivalents and marketable securities, total 273,693
Level 1 [Member] | U.S. Treasuries [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 82,533
Level 1 [Member] | Government Securities [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 12,497
Level 2 [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Cash equivalents 19,985
Cash equivalents and marketable securities, total 227,858
Level 2 [Member] | Certificates of Deposit [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 15,990
Level 2 [Member] | Government Securities [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities 7,493
Level 2 [Member] | Corporate Debt Securities [Member]  
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]  
Marketable securities $ 184,390
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair value measurements - Additional Information (Detail)
Mar. 31, 2017
USD ($)
Significant Of Accounting Policies [Line Items]  
Financial assets or liabilities that were classified as Level 3 $ 0
Transfers of assets from Level 1 to Level 2 0
Transfers of assets from Level 2 to Level 1 0
Transfers of liabilities from Level 1 to Level 2 0
Transfers of liabilities from Level 2 to Level 1 0
Level 3 [Member]  
Significant Of Accounting Policies [Line Items]  
Financial assets classified as Level 3 0
Financial liabilities classified as Level 3 $ 0
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Marketable securities - Additional Information (Detail)
3 Months Ended 12 Months Ended
Mar. 31, 2017
USD ($)
Securities
Dec. 31, 2016
USD ($)
Securities
Significant Of Accounting Policies [Line Items]    
Realized gains or losses on marketable securities $ 0  
Minimum period to liquidate 12 months 12 months
Debt securities in an unrealized loss position | Securities 123 158
Aggregate fair value of debt securities in an unrealized loss position $ 241,800,000 $ 335,400,000
Reclassification Out of Accumulated Other Comprehensive Income [Member]    
Significant Of Accounting Policies [Line Items]    
Accumulated other comprehensive income (loss) $ 0  
Maximum [Member]    
Significant Of Accounting Policies [Line Items]    
Investment maturity period, non-current 2 years 2 years
Investment maturity period, current 1 year 1 year
Minimum [Member]    
Significant Of Accounting Policies [Line Items]    
Investment maturity period, non-current 1 year 1 year
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Marketable securities - Marketable Securities (Detail) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Certificates of Deposit [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Fair Value $ 15,990  
U.S. Treasuries [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Fair Value 82,533  
Government Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Fair Value 19,990  
Corporate Debt Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Fair Value 184,390  
Fair Value, Measurements, Recurring [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 303,115 $ 413,123
Unrealized Gains 9 13
Unrealized Losses (221) (326)
Fair Value 302,903 412,810
Fair Value, Measurements, Recurring [Member] | Current: [Member] | Certificates of Deposit [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 11,240 11,280
Unrealized Gains 4 2
Unrealized Losses (2) (3)
Fair Value 11,242 11,279
Fair Value, Measurements, Recurring [Member] | Current: [Member] | U.S. Treasuries [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 82,599 141,678
Unrealized Gains   2
Unrealized Losses (66) (62)
Fair Value 82,533 141,618
Fair Value, Measurements, Recurring [Member] | Current: [Member] | Government Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 17,519 19,533
Unrealized Losses (22) (23)
Fair Value 17,497 19,510
Fair Value, Measurements, Recurring [Member] | Current: [Member] | Corporate Debt Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 168,282 208,285
Unrealized Gains   3
Unrealized Losses (74) (135)
Fair Value 168,208 208,153
Fair Value, Measurements, Recurring [Member] | Non-Current: [Member] | Certificates of Deposit [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 4,760 7,600
Unrealized Gains 1 6
Unrealized Losses (13) (13)
Fair Value 4,748 7,593
Fair Value, Measurements, Recurring [Member] | Non-Current: [Member] | Government Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 2,500 4,499
Unrealized Losses (7) (21)
Fair Value 2,493 4,478
Fair Value, Measurements, Recurring [Member] | Non-Current: [Member] | Corporate Debt Securities [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 16,215 20,248
Unrealized Gains 4  
Unrealized Losses (37) (69)
Fair Value $ 16,182 $ 20,179
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Celgene Collaboration Agreements - Additional Information (Detail)
3 Months Ended
May 17, 2016
USD ($)
Program
Apr. 27, 2015
USD ($)
Jul. 31, 2014
USD ($)
Oct. 31, 2011
Mar. 31, 2017
USD ($)
Mar. 31, 2016
USD ($)
Dec. 31, 2016
USD ($)
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Collaboration revenue recognized         $ 10,508,000 $ 31,281,000  
Collaboration receivable         11,265,000   $ 4,886,000
Milestone or royalty payments received         0.0 25,000,000  
Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure         2,776,000 8,794,000  
2016 Agreement [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Research agreement commence date May 17, 2016            
2010 Agreement [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Agreement amended date     2014-07 2011-10      
Milestone payment upon achievement of a specified commercial milestone event     $ 25,000,000        
AG-120 And AG-881 Agreements [Member] | Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure           3,300,000  
AG-881 Agreements [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Initial payment received   $ 10,000,000          
Revenue recognition, selling price $ 48,700,000            
AG-881 Agreements [Member] | Split License [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price   33,200,000          
Collaboration revenue recognized           900,000  
AG-881 Agreements [Member] | Participation Service [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price 1,500,000 800,000          
Collaboration revenue recognized         100,000 100,000  
AG-881 Agreements [Member] | In Process Research and Development [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price $ 207,000,000 30,500,000          
Collaboration revenue recognized         6,600,000 3,600,000  
Celgene Collaboration Agreements [Member] | Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure           500,000  
Phase 1b Frontline Combination Trial [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Collaboration revenue recognized           700,000  
Phase 1b Frontline Combination Trial [Member] | Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure           200,000  
Other Than 65/35 Program [Member] | Co-Development and Co-Commercialization Agreements [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Profit or loss share percentage 50.00%            
Four Separate Ongoing Development Services Determined as Primary Obligor of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price   12,700,000          
Collaboration revenue recognized           1,000,000  
Four Separate Ongoing Development Services Not Determined As Primary Obligor Of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price   97,300,000          
Four Separate Ongoing Development Services Not Determined As Primary Obligor Of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member] | Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure           $ 4,800,000  
Three Separate Ongoing Development Services Determined As Primary Obligor Of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price $ 67,800,000            
Collaboration revenue recognized         3,700,000    
Three Separate Ongoing Development Services Not Determined As Primary Obligor Of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Revenue recognition, selling price $ 22,400,000            
Three Separate Ongoing Development Services Not Determined As Primary Obligor Of Development Activities [Member] | AG-881 Agreements [Member] | In Process Research and Development [Member] | Research and development expense [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Reduction in research and development expenditure         2,800,000    
Celgene [Member] | 2016 Agreement [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Initial research agreement period 4 years            
Research agreement expire period May 17, 2020            
Term of research extended 2 years            
Number of research programs | Program 3            
Initial payment received $ 200,000,000            
Upfront payment agreement extension fee receivable 40,000,000            
Designation fee receivable 8,000,000            
Option exercise fee receivable 30,000,000       30,000,000    
Additional option exercise fee for further development $ 10,000,000            
Collaboration receivable         8,000,000    
Celgene [Member] | 65/35 Program [Member] | Co-Development and Co-Commercialization Agreements [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Profit or loss share percentage 65.00%            
Minimum [Member] | Celgene [Member] | 2016 Agreement [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Minimum option exercise fee receivable for continuation program $ 35,000,000            
Maximum [Member] | 2010 Agreement [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Receipts of potential milestone payments     95,000,000        
Milestone payments upon achievement of specified regulatory milestone events     $ 70,000,000   $ 70,000,000    
Maximum [Member] | AG-881 Agreements [Member]              
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]              
Receipts of potential milestone payments   70,000,000          
Milestone payment for filing of first NDA   15,000,000          
Milestone payments upon achievement of specified regulatory milestone events   $ 55,000,000          
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Celgene Collaboration Agreements - Schedule of Milestone-Based Payments Associated With 2016 Agreement (Detail) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable $ 0.0 $ 25,000,000
Other Than 65/35 Program [Member] | Co-Development and Co-Commercialization Agreements [Member] | Clinical Development Event [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 20,000,000  
Celgene [Member] | Co-Development and Co-Commercialization Agreements [Member] | Clinical Development Event [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 25,000,000  
Celgene [Member] | Co Commercial Agreement [Member] | Clinical Development Event [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 25,000,000  
Maximum [Member] | Other Than 65/35 Program [Member] | Co-Development and Co-Commercialization Agreements [Member] | Regulatory Milestone Events [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 148,800,000  
Maximum [Member] | Celgene [Member] | Co-Development and Co-Commercialization Agreements [Member] | Regulatory Milestone Events [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 183,800,000  
Maximum [Member] | Celgene [Member] | Co Commercial Agreement [Member] | Regulatory Milestone Events [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable 236,300,000  
Maximum [Member] | Celgene [Member] | Co Commercial Agreement [Member] | Commercial Milestone Events [Member]    
Revenue Recognition, Milestone Method [Line Items]    
Potential milestone-based payment receivable $ 125,000,000  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accrued Expenses - Summary of Accrued Expenses (Detail) - USD ($)
$ in Thousands
Mar. 31, 2017
Dec. 31, 2016
Payables and Accruals [Abstract]    
Accrued compensation $ 5,285 $ 11,092
Accrued research and development costs 13,474 20,266
Accrued professional fees 5,060 476
Accrued other 1,295 168
Total $ 25,114 $ 32,002
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock options granted 1,129,352  
Restricted Stock Units (RSUs) [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total unrecognized compensation expense related to stock option $ 4,200,000  
Weighted-average period to recognize compensation expense 1 year 6 months  
2007 Plan and 2013 Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Common stock reserved for issuance 7,802,377  
Shares available for future issuance 1,345,120  
2013 Stock Incentive Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total unrecognized compensation expense related to stock option $ 104,500,000  
Weighted-average period to recognize compensation expense 2 years 8 months 5 days  
2013 Stock Incentive Plan [Member] | Performance-Based Stock Option Grants [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock options granted 0 0
2013 Stock Incentive Plan [Member] | Performance-Based Stock Units (PSUs) [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total unrecognized compensation expense related to stock option $ 10,700,000  
2013 Employee Stock Purchase Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Shares available for future issuance 239,921  
Common stock, shares issued $ 33,521 $ 12,327
Purchase price discount rate stock option 85.00%  
Opportunity to purchase of common stock 327,272  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Summary of Company's Stock Option Activity (Detail)
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Number of Stock Options, Outstanding, Beginning balance | shares 5,218,880
Number of Stock Options, Granted | shares 1,129,352
Number of Stock Options, Exercised | shares (142,539)
Number of Stock Options, Forfeited/Expired | shares (75,899)
Number of Stock Options, Outstanding, Ending balance | shares 6,129,794
Number of Stock Options, Exercisable | shares 2,909,093
Number of Stock Options, Vested and expected to vest | shares 6,129,794
Weighted-Average Exercise Price, Outstanding, Beginning balance | $ / shares $ 46.79
Weighted-Average Exercise Price, Granted | $ / shares 49.85
Weighted-Average Exercise Price, Exercised | $ / shares 21.56
Weighted-Average Exercise Price, Forfeited/Expired | $ / shares 66.24
Weighted-Average Exercise Price, Outstanding, Ending balance | $ / shares 47.70
Weighted-Average Exercise Price, Exercisable | $ / shares 37.76
Weighted-Average Exercise Price, Vested and expected to vest | $ / shares $ 47.70
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Summary of Unvested RSUs Activity (Detail) - Restricted Stock Units (RSUs) [Member]
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Unvested shares beginning of period | shares 77,050
Granted | shares 57,100
Vested | shares
Forfeited/expired | shares (7,300)
Unvested shares end of period | shares 126,850
Weighted-average grant date fair value, Unvested shares beginning of period | $ / shares $ 49.60
Weighted-average grant date fair value, Granted | $ / shares 50.40
Weighted-average grant date fair value, Vested | $ / shares
Weighted-average grant date fair value, Forfeited/expired | $ / shares 39.76
Weighted-average grant date fair value, Unvested shares end of period | $ / shares $ 50.52
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Schedule of Performance-Based Units (Detail) - Performance-Based Stock Units (PSUs) [Member]
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Unvested shares beginning of period | shares 200,613
Granted | shares
Vested | shares
Forfeited/expired | shares
Unvested shares end of period | shares 200,613
Weighted-average grant date fair value, Unvested shares beginning of period | $ / shares $ 53.36
Weighted-average grant date fair value, Granted | $ / shares
Weighted-average grant date fair value, Vested | $ / shares
Weighted-average grant date fair value, Forfeited/expired | $ / shares
Weighted-average grant date fair value, Unvested shares end of period | $ / shares $ 53.36
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Schedule of Stock-Based Compensation Expense by Award Type Included Within the Condensed Consolidated Statements of Operations (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation $ 10,734 $ 9,107
Stock Options [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation 9,902 8,564
Restricted Stock Units (RSUs) [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation 595 359
Performance-Based Stock Option Grants [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation   46
Employee Stock Purchase Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation $ 237 $ 138
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
Share-Based Payments - Stock-Based Compensation Expense for Employee and Non-Employee Stock Options, Restricted Stock Units, Performance-Based Stock Options, Performance-Based Stock Units and Employee Stock Purchase Plan Shares (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Allocated share based compensation expense $ 10,734 $ 9,107
Research and development expense [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Allocated share based compensation expense 7,025 5,528
General and administrative expense [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Allocated share based compensation expense $ 3,709 $ 3,579
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Tax Disclosure [Abstract]    
(Benefit) provision for income taxes $ 0 $ 0
Uncertain Tax Positions $ 0 $ 0
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loss per Share - Common Stock Excluded from Calculation of Diluted Net Loss Per Share (Detail) - shares
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 6,262,177 5,396,377
Stock Options [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 6,129,794 5,318,350
Restricted Stock Units (RSUs) [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 126,850 73,800
Employee Stock Purchase Plan shares [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 5,533 4,227
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events - Additional Information (Detail) - Subsequent Event [Member] - Aurigene Agreement [Member]
$ in Millions
Apr. 27, 2017
USD ($)
Subsequent Event [Line Items]  
Upfront payments $ 3.0
Milestone payment upon achievement of certain development and regulatory milestones $ 17.0
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