UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~June 30, ~~2017~~2021

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

For the transition period from to

Commission File Number: 001-36065

ACCELERON PHARMA INC.

(Exact name of registrant as specified in its charter)

Delaware

2836

27-0072226

(State or other jurisdiction of

incorporation or organization)

~~2836~~

(Primary Standard Industrial

Classification Code Number)

~~27-0072226~~

(I.R.S. Employer

Identification Number)

128 Sidney Street

Cambridge, MA 02139

(617) 649-9200

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 per share	XLRN	The Nasdaq Global Market

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. Yesx ☒ Noo ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesx ☒ Noo ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

~~Large accelerated filer~~

~~Accelerated filer~~

~~Non-accelerated filer~~

o ~~(Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

Emerging growth company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

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

As of ~~October~~July 31, ~~2017,~~2021, there were ~~45,235,024~~60,900,521 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

Table of Contents

TABLE OF CONTENTS


					Page
PART I. FINANCIAL INFORMATION					3

Item 1.			Financial Statements (unaudited)		3

				~~Page~~
~~PART I. FINANCIAL INFORMATION~~		3

~~Item 1.~~	~~Financial Statements (unaudited)~~	3

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~June 3 0 , 2021 and December 31, ~~2016~~2020	3

			Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and ~~nine~~ six months ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020		4

			Condensed Consolidated Statements of Stockholders Equity for the three and six months ended June 3 0 , 2021 and 2020		5

			Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020		57

			Notes to Condensed Consolidated Financial Statements		68

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		1918

Item 3.			Quantitative and Qualitative Disclosures About Market Risks		28

Item 4.			Controls and Procedures		2829

PART II. OTHER INFORMATION					2930

Item 1.			Legal Proceedings		2930

Item 1A.			Risk Factors		2930

Item 6.			Exhibits		2930

SIGNATURES					3031

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Acceleron Pharma Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share and per share data)

(unaudited)


	September 30, 2017			December 31, 2016				June 30, 2021		December 31, 2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	238,959		$	20,950		Cash and cash equivalents	$	336,199	$	670,952
Collaboration receivables (all amounts are with related party)	2,879			3,234
Short-term investments							Short-term investments	287,151		178,951
Collaboration receivables (all amounts are with a related party)							Collaboration receivables (all amounts are with a related party)	27,937		26,101
Prepaid expenses and other current assets	3,334			3,862			Prepaid expenses and other current assets	66,486		17,265
Short-term investments	98,266			118,740
Total current assets	343,438			146,786			Total current assets	717,773		893,269
Property and equipment, net	7,211			5,201			Property and equipment, net	8,580		7,768
Restricted cash	1,132			946
Operating lease - right of use asset, net							Operating lease - right of use asset, net	18,799		21,988

Long-term investments							Long-term investments	89,194		7,585
Other assets	124			22			Other assets	1,706		1,727
Long-term investments	29,372			94,692
Total assets	$	381,277		$	247,647		Total assets	$	836,052	$	932,337
Liabilities and stockholders’ equity							Liabilities and stockholders’ equity
Current liabilities:							Current liabilities:
Accounts payable	$	1,024		$	1,590		Accounts payable	$	9,438	$	8,472
Accrued expenses	14,141			13,249			Accrued expenses	42,488		44,681
Deferred revenue	541			541
Deferred rent	178			769
Operating lease liability - right of use							Operating lease liability - right of use	7,552		7,010

Total current liabilities	15,884			16,149			Total current liabilities	59,478		60,163
Deferred revenue, net of current portion	3,297			3,704
Deferred rent, net of current portion	1,628			953
Warrants to purchase common stock	1,927			1,244
Operating lease liability - right of use, net of current portion							Operating lease liability - right of use, net of current portion	13,167		17,067

Other non-current liabilities							Other non-current liabilities	373		0

Total liabilities	22,736			22,050			Total liabilities	73,018		77,230
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 12)							Commitments and contingencies (Note 12)	0		0
Stockholders’ equity:							Stockholders’ equity:
Undesignated preferred stock, $0.001 par value: 25,000,000 shares authorized and no shares issued or outstanding	—			—
Common stock, $0.001 par value: 175,000,000 shares authorized; 44,414,694 and 38,251,826 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	45			39
Undesignated preferred stock, $0.001 par value: 25,000,000 shares authorized and 0 shares issued or outstanding							Undesignated preferred stock, $0.001 par value: 25,000,000 shares authorized and 0 shares issued or outstanding	0		0
Common stock, $0.001 par value: 175,000,000 shares authorized; 60,777,558 and 60,383,867 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively							Common stock, $0.001 par value: 175,000,000 shares authorized; 60,777,558 and 60,383,867 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	61		60
Additional paid-in capital	803,907			590,474			Additional paid-in capital	1,767,811		1,732,772
Accumulated deficit	(445,097		)	(364,491		)	Accumulated deficit	(1,004,429)		(877,437)
Accumulated other comprehensive loss	(314		)	(425		)	Accumulated other comprehensive loss	(409)		(288)
Total stockholders’ equity	358,541			225,597			Total stockholders’ equity	763,034		855,107
Total liabilities and stockholders’ equity	$	381,277		$	247,647		Total liabilities and stockholders’ equity	$	836,052	$	932,337

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(amounts in thousands, except per share data)

(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenue:

Collaboration revenue:

License and milestone $ 135
$ 135
$ 406
$ 15,415
Cost-sharing, net 2,879
2,870
9,370
8,987
Total revenue (all amounts are with related party) 3,014
3,005
9,776
24,402
Costs and expenses:

Research and development 21,059
17,102
64,387
49,492
General and administrative 7,533
6,411
26,735
19,029
Total costs and expenses 28,592
23,513
91,122
68,521
Loss from operations (25,578 ) (20,508 ) (81,346 ) (44,119 )
Other (expense) income, net (410 ) (794 ) (683 ) 5,026
Interest income 496
512
1,474
1,348
Total other income (expense) net 86
(282 ) 791
6,374
Loss before income taxes (25,492 ) (20,790 ) (80,555 ) (37,745 )
Income tax benefit 41
20
29
20
Net loss applicable to common stockholders $ (25,451 ) $ (20,770 ) $ (80,526 ) $ (37,725 )

Net loss per share applicable to common stockholders-basic and diluted (Note 9) $ (0.65 ) $ (0.55 ) $ (2.08 ) $ (1.01 )

Weighted-average number of common shares used in computing net loss per share applicable to common stockholders: 39,361
37,616
38,804
37,268

Other comprehensive loss:
Net loss $ (25,451 ) $ (20,770 ) $ (80,526 ) $ (37,725 )
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax of $59 thousand, $59 thousand, $53 thousand and $53 thousand for the three and nine months ended September 30, 2017 and 2016, respectively 100
(374 ) 170
98
Comprehensive loss $ (25,351 ) $ (21,144 ) $ (80,356 ) $ (37,627 )


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue:
Collaboration revenue:
Milestone	$	0	$	25,000	$	0	$	25,000
Cost-sharing, net	2,294		3,678		4,656		6,502
Royalty	25,646		11,074		48,042		12,594
Total revenue (all amounts are with a related party)	27,940		39,752		52,698		44,096
Costs and expenses:
Research and development	56,130		38,251		113,429		75,917
Selling, general and administrative	35,472		20,414		66,534		38,663
Total costs and expenses	91,602		58,665		179,963		114,580
Loss from operations	(63,662)		(18,913)		(127,265)		(70,484)


Other income, net	149		466		286		1,113
Loss before income taxes	(63,513)		(18,447)		(126,979)		(69,371)
Income tax provision	(8)		(4)		(13)		(20)
Net loss	$	(63,521)	$	(18,451)	$	(126,992)	$	(69,391)
Other comprehensive income (loss):
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax	8		161		(121)		(106)
Comprehensive loss	$	(63,513)	$	(18,290)	$	(127,113)	$	(69,497)

Net loss per share- basic and diluted	$	(1.05)	$	(0.34)	$	(2.10)	$	(1.29)

Weighted-average number of common shares used in computing net loss per share- basic and diluted	60,724		53,860		60,524		53,610

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Stockholders' Equity

(amounts in thousands, except share and per share data)

(unaudited)

Three and Six Months Ended June 30, 2021


	Common Stock
	Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at December 31, 2020	60,383,867	$	60	$	1,732,772	$	(877,437)	$	(288)	$	855,107
Stock-based compensation	—	—		15,626		—		—		15,626
Exercise of stock options	149,724	—		5,865		—		—		5,865
Vesting of restricted stock units, net of shares withheld for taxes	84,902			(3,888)		—		—		(3,888)
Issuance of common stock related to ESPP	20,001	—		1,721		—		—		1,721
Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(129)		(129)
Net loss	—	—		—		(63,471)				(63,471)
Balance at March 31, 2021	60,638,494	60		1,752,096		(940,908)		(417)		810,831
Stock-based compensation	—	—		13,479		—		—		13,479
Exercise of stock options	100,450	—		4,055		—		—		4,055
Vesting of restricted stock units, net of shares withheld for taxes	38,614	1		(1,819)		—		—		(1,818)
Unrealized gain on available-for-sale securities	—	—		—				8		8
Net loss	—	—		—		(63,521)		—		(63,521)
Balance at June 30, 2021	60,777,558	$	61	$	1,767,811	$	(1,004,429)	$	(409)	$	763,034

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Three and Six Months Ended June 30, 2020


	Common Stock
	Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at December 31, 2019	53,123,567	$	53	$	1,160,807	$	(711,407)	$	23	$	449,476
Stock-based compensation	—	—		6,679		—				6,679

Exercise of stock options	295,757	—		8,485		—				8,485
Vesting of restricted stock units, net of shares withheld for taxes	77,949	—		(472)		—				(472)
Issuance of common stock related to ESPP	22,647	—		860		—				860
Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(267)		(267)
Net loss	—	—		—		(50,939)				(50,939)
Balance at March 31, 2020	53,519,920	53		1,176,359		(762,346)		(244)		413,822
Stock-based compensation	—	—		7,140		—		—		7,140
Exercise of stock options	617,441	1		19,609		—		—		19,610
Vesting of restricted stock units, net of shares withheld for taxes	29,351	—		(663)		—		—		(663)
Unrealized gain on available-for-sale securities, net of tax	—	—		—		—		161		161
Net loss	—	—		—		(18,451)		—		(18,451)
Balance at June 30, 2020	54,166,712	$	54	$	1,202,445	$	(780,797)	$	(83)	$	421,619

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


	Six Months Ended June 30,
	2021		2020
Operating Activities
Net loss	$	(126,992)	$	(69,391)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,062		1,938
Stock-based compensation	29,105		13,819

Other non-cash items	(3,459)		1,563

Changes in assets and liabilities:
Prepaid expenses and other assets	(49,201)		(9,293)
Collaboration receivables (all amounts are with a related party)	(1,836)		(31,205)
Non-cash lease expense	3,189		2,792
Accounts payable	542		10,334
Accrued expenses	(2,391)		(6,998)

Operating lease obligations	(3,358)		(2,977)
Other changes in operating assets and liabilities	0		17
Net cash used in operating activities	(152,339)		(89,401)
Investing Activities
Purchases of investments	(381,477)		(58,539)
Proceeds from sales and maturities of investments	195,019		168,385
Purchases of property and equipment	(1,889)		(2,420)
Net cash (used in) provided by investing activities	(188,347)		107,426
Financing Activities


Net proceeds from exercises and vesting of stock awards, and ESPP contributions	5,933		27,819
Net cash provided by financing activities	5,933		27,819
Net (decrease) increase in cash, cash equivalents and restricted cash	(334,753)		45,844
Cash, cash equivalents and restricted cash at beginning of period	672,549		239,274
Cash, cash equivalents and restricted cash at end of period	$	337,796	$	285,118
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	$	626	$	352

Capitalized follow-on public offering costs included in accrued expenses	$	0	$	423
Additions to property and equipment for asset retirement obligation	$	373	$	0

Nine Months Ended September 30,
2017 2016
Operating Activities
Net loss $ (80,526 ) $ (37,725 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,023
1,158
Stock-based compensation 21,877
13,387
Change in fair value of warrants 683
(5,026 )
Other non-cash items 211
(262 )
Changes in assets and liabilities:
Prepaid expenses and other assets 426
(1,211 )
Collaboration receivables 355
609
Accounts payable (566 ) 1,196
Accrued expenses 160
389
Restricted cash (186 ) (150 )
Deferred revenue (407 ) (414 )
Deferred rent 22
94
Net cash used in operating activities (55,928 ) (27,955 )
Investing Activities
Purchases of investments (245 ) (132,565 )
Proceeds from sales and maturities of investments 86,001
21,120
Purchases of property and equipment (3,639 ) (2,246 )
Net cash provided by (used in) investing activities 82,117
(113,691 )
Financing Activities
Proceeds from issuance of common stock from public offering, net of issuance costs 187,986
140,697
Payments for withholding taxes on restricted stock units (226 ) —
Proceeds from exercise of stock options and warrants to purchase common stock 3,233
3,524
Proceeds from issuances of common stock related to employee stock purchase plan 827
658
Net cash provided by financing activities 191,820
144,879
Net increase in cash and cash equivalents 218,009
3,233
Cash and cash equivalents at beginning of period 20,950
27,783
Cash and cash equivalents at end of period $ 238,959
$ 31,016
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses $ 395
$ 25
Capitalized follow-on public offering costs included in accrued expenses $ 337

$ —

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Acceleron Pharma Inc. (Acceleron or the Company) is a Cambridge, Massachusetts-based ~~clinical stage~~ biopharmaceutical company dedicated to the discovery, development and commercialization of therapeutics to treat serious and rare diseases. The Company’s leadership in the understanding of TGF-beta biology and protein engineering generates innovative compounds that engage the body’s ability to regulate cellular growth and repair.

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, the risk that the Company never achieves profitability or successfully commercializes its products, the need for substantial additional financing, ~~risk~~risks of relying on third parties, risks of clinical trial failures, dependence on key personnel, protection of proprietary technology, and compliance with government regulations.

2. Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

The accompanying interim condensed consolidated financial statements are ~~unaudited. The~~unaudited and reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of June 30, 2021, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, have not changed, and the unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, ~~2016 except for the adoption of Accounting Standards Update (ASU) No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,~~ ~~which did not have a material impact, and, in~~2020. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of ~~September~~June 30, ~~2017,~~2021, the results of its operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, stockholders' equity for the three and six months ended June 30, 2021 and 2020, and its cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~ 2020.

The accompanying interim condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017,~~2021, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, ~~2016,~~2020, and the notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized events requiring disclosure, other than those disclosed in this Report on Form 10-Q.

The accompanying interim condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of September 30, 2017, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, have not changed, except for the adoption of Accounting Standards Update (ASU) No. 2016-09, ~~Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting,~~ ~~which is discussed further in Note 16.~~

3. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts expensed during the reporting period.

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Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether

historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these condensed consolidated financial statements, management used ~~significant~~ estimates in the following areas, among others: ~~revenue recognition,~~accrued and prepaid clinical expenses, contract manufacturing expense, stock-based compensation expense, ~~the determination of the fair value of stock-based awards, the fair value of liability-classified warrants, accrued expenses,~~revenue recognition, and the recoverability of the ~~Company’s~~Company's net deferred tax assets and related valuation allowance.

4. Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as ~~one~~1 operating segment, which is the discovery, development and commercialization of highly innovative therapeutics to treat serious and rare diseases. All material long-lived assets of the Company reside in the United States. The Company does use contract research organizations (CROs) and research institutions located outside the United States. Some of these expenses are subject to collaboration reimbursement which is presented as a component of cost sharing, net in the consolidated statements of operations and comprehensive loss.

5. Cash, Cash Equivalents and Short-term and Long-term Investments

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair ~~market~~ value.

The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified all of its marketable securities at ~~September~~June 30, ~~2017~~2021 as “available-for-sale” pursuant to ASC 320, Investments – Debt and Equity Securities. The Company records available-for-sale securities at fair value, with the unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. There were no realized gains or losses on marketable securities for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2021, and ~~2016.~~2020.

Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their maturities as well as the time period the Company intends to hold such securities.

The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income. The cost of securities sold is based on the specific identification method. The Company includes ~~in interest income~~ interest and dividends on securities classified as ~~available-for-sale.~~available-for-sale in interest income in the accompanying condensed consolidated statements of operations and comprehensive loss. Accrued interest receivable relating to the Company's available-for-sale securities is presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets, and amounted to $1.8 million and $0.3 million at June 30, 2021 and December 31, 2020, respectively.

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments-Credit Losses. The ~~Company reviews marketable securities for other-than-temporary impairment whenever~~new standard requires an estimate of expected credit losses only when the fair value of ~~a marketable~~an available-for-sale debt security is below its amortized cost basis, and credit losses are limited to the amount by which the security’s amortized cost basis exceeds its fair value. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet with a corresponding adjustment to earnings.

The standard additionally requires an investor to determine whether a decline in the fair value below the amortized cost basis of an available-for-sale debt security is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. The Company adopted ASU 2016-13 effective January 1, 2020, with no material impact on its consolidated financial statements and related disclosures.

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The following is a summary of available-for-sale securities with unrealized losses for less than 12 months as of June 30, 2021 and December 31, 2020 (in thousands):


	June 30, 2021				December 31, 2020
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate obligations	$	239,234	$	(160)	$	54,724	$	(13)
U.S. Treasury securities	12,011		(1)		72,289		(7)
Mortgage and other asset backed securities	0		0		4,998		(2)
Total available-for sale securities in an unrealized loss position	$	251,245	$	(161)	$	132,012	$	(22)

At June 30, 2021, our security portfolio consisted of 122 securities related to investments in debt securities available-for-sale, of which 83 securities were in an unrealized loss position. There were 0 securities in an unrealized loss position for greater than 12 months as of June 30, 2021. The unrealized losses on the Company's available-for-sale securities were caused by central bank and market interest rate decreases on securities purchased at a premium. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost ~~and evidence indicates that a marketable security’s carrying amount is~~bases of the investments. The Company does not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if the Company has experienced a credit loss, has the intentintend to sell the ~~marketable security, or if~~investments and it is not more likely than not that the Company will be required to sell the ~~marketable security~~investments before recovery of ~~the~~their amortized cost ~~basis. Evidence considered in this assessment includes reasons~~bases. The Company did not record an allowance for ~~the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.~~

~~The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months~~credit losses as of ~~September~~June 30, 2017 and December 31, 2016 was $53.1 million and $172.2 million, respectively. The aggregate fair value of securities held by the Company in an unrealized loss position for more than twelve months as of September 30, 2017 and December 31, 2016 was $55.8 million and $5.5 million, respectively. The aggregate unrealized loss for those securities in an unrealized loss position for more than twelve months is $0.1 million and $2 thousand, respectively. As a result, the Company determined it did not hold any investments with any other-than-temporary impairment as of September 30, 2017 and December 31, 2016.

2021.

The following is a summary of cash, cash equivalents and available-for-sale securities as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (in thousands):


	June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value





Cash and cash equivalents due in 90 days or less	$	336,199	$	0	$	0	$	336,199
Available-for-sale securities:
Corporate obligations	324,348		21		(160)		324,209
U.S. Treasury securities	52,132		5		(1)		52,136


Total available-for-sale securities (1)	$	376,480	$	26	$	(161)	$	376,345
Total cash, cash equivalents and available-for-sale securities	$	712,679	$	26	$	(161)	$	712,544


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	670,952	$	0	$	0	$	670,952
Available-for-sale securities:
Corporate obligations	45,989		5		(13)		45,981
U.S. Treasury securities	135,315		3		(7)		135,311
Certificates of deposit	245		1		0		246
Mortgage and other asset backed securities	5,000		0		(2)		4,998
Total available-for-sale securities (1)	$	186,549	$	9	$	(22)	$	186,536
Total cash, cash equivalents and available-for-sale securities	$	857,501	$	9	$	(22)	$	857,488

(1)All available-for-sale securities mature within two and three years as of June 30, 2021 and December 31, 2020, respectively.

September 30, 2017
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents due in 90 days or less $ 238,959
$ —
$ —
$ 238,959
Available-for-sale securities:
Corporate obligations due in one year or less 44,789
1
(47 ) 44,743
Corporate obligations due in more than one year 11,560
—
(47 ) 11,513
U.S. Treasury securities due in one year or less 10,004
—
(31 ) 9,973
U.S. Treasury securities due in more than one year 4,021
—
(27 ) 3,994
Certificates of deposit due in one year or less 9,092
—
—
9,092
Certificates of deposit due in more than one year 1,904
—
—
1,904
Mortgage and other asset backed securities due in one year or less 34,497
—
(39 ) 34,458
Mortgage and other asset backed securities due in more than one year 12,026
—
(65 ) 11,961
Total available-for-sale securities $ 127,893
$ 1
$ (256 ) $ 127,638
Total cash, cash equivalents and available-for-sale securities $ 366,852
$ 1
$ (256 ) $ 366,597

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December 31, 2016
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Cash and cash equivalents due in 90 days or less $ 20,950
$ —
$ —
$ 20,950
Available-for-sale securities:
Corporate obligations due in one year or less 45,839
1
(58 ) 45,782
Corporate obligations due in more than one year 42,895
—
(185 ) 42,710
U.S. Treasury securities due in one year or less 22,490
—
(10 ) 22,480
U.S. Treasury securities due in more than one year 11,541
—
(53 ) 11,488
Certificates of deposit due in one year or less 13,562
—
—
13,562
Certificates of deposit due in more than one year 9,811
—
—
9,811
Mortgage and other asset backed securities due in one year or less 36,948
—
(32 ) 36,916
Mortgage and other asset backed securities due in more than one year 30,771
—
(88 ) 30,683
Total available-for-sale securities $ 213,857
$ 1
$ (426 ) $ 213,432
Total cash, cash equivalents and available-for-sale securities $ 234,807
$ 1
$ (426 ) $ 234,382

6. Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts presented in the statements of cash flows (in thousands):


	June 30,
	2021		2020
Cash and cash equivalents	$	336,199	$	283,521
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash presented in the statement of cash flows	$	337,796	$	285,118

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the Company maintained letters of credit totaling ~~$1.1~~$1.6 million ~~and $0.9 million, respectively,~~ held in the form of certificates of deposit and money market funds as collateral for the Company's facility lease obligation and its credit cards. Restricted cash is included within other assets in the condensed consolidated balance sheet.

7. Concentrations of Credit Risk and Off-Balance Sheet Risk

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, restricted cash, short-term and long-term investments and collaboration receivables. The Company maintains its cash and cash equivalent balances and short-term and long-term investments with financial institutions that management believes are creditworthy. Short-term and long-term investments consist of investment grade corporate obligations, treasury notes, asset backed securities, and certificates of deposit. The Company’s investment policy includes

guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentrations of credit risk.

The Company routinely assesses the creditworthiness of its ~~customers and~~ collaboration ~~partners.~~partner. The Company has not experienced any material losses related to receivables from individual customers and collaboration partners, or groups of customers. The Company does not require collateral. Due to these factors, ~~no additional~~0 allowance for credit ~~risk beyond amounts provided~~losses has been recorded for ~~collection losses is believed by management to be probable in~~ the ~~Company’s~~Company's collaboration ~~receivables.~~receivables as of June 30, 2021 and December 31, 2020.

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8. Fair Value Measurements

The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input ~~applicable~~that is significant to each financial instrument as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (in thousands):

September 30, 2017

Quoted Prices
in Active Markets
for Identical Items
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
Assets:

Money market funds $ 224,053
$ —
$ —
$ 224,053
Corporate obligations —
56,256
—
56,256
U.S. Treasury securities —
13,967
—
13,967
Certificates of deposit —
10,997
—
10,997
Mortgage and other asset backed securities —
46,419
—
46,419
Restricted cash 1,132
—
—
1,132
Total assets $ 225,185
$ 127,639
$ —
$ 352,824
Liabilities:

Warrants to purchase common stock $ —
$ —
$ 1,927
$ 1,927
Total liabilities $ —
$ —
$ 1,927
1,927


	June 30, 2021
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	288,658	$	0	$	0	$	288,658
Corporate obligations	0		324,209		0		324,209
U.S. Treasury securities	0		52,136		0		52,136


Total assets	$	288,658	$	376,345	$	0	$	665,003


	December 31, 2016									December 31, 2020
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:									Assets:
Money market funds	$	19,818	$	—	$	—	$	19,818	Money market funds	$	266,562	$	0	$	0	$	266,562
Corporate obligations	—		88,492		—		88,492		Corporate obligations	0		60,982		0		60,982
U.S. Treasury securities	—		33,968		—		33,968		U.S. Treasury securities	0		215,310		0		215,310
Certificates of deposit	—		23,373		—		23,373		Certificates of deposit	0		246		0		246
Mortgage and other asset backed securities	—		67,599		—		67,599		Mortgage and other asset backed securities	0		4,998		0		4,998
Restricted cash	946		—		—		946
Total assets	$	20,764	$	213,432	$	—	$	234,196	Total assets	$	266,562	$	281,536	$	0	$	548,098
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	1,244	$	1,244
Total liabilities	$	—	$	—	$	1,244	$	1,244

The money market funds noted above are included in cash and cash equivalents in the accompanying condensed consolidated balance sheets. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 or the year ended December 31, ~~2016.~~

2020. Items measured at fair value on a recurring basis include short-term and long-term investments (Note 5)~~, and warrants to purchase common stock (Note 12)~~. ~~During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs.~~

The following table sets forth a summary of changes in the fair value of the Company’s common stock warrant liabilities, which represent a recurring measurement that is classified within Level 3 of the fair value hierarchy, wherein fair value is estimated using significant unobservable inputs (in thousands):

Nine Months Ended September 30,
2017 2016
Beginning balance $ 1,244
$ 17,187
Change in fair value 683
(5,026 )
Ending balance $ 1,927
$ 12,161

The fair value of the warrants to purchase common stock on the date of issuance and on each re-measurement date for those warrants classified as liabilities was estimated using either the Monte Carlo simulation framework, which incorporates future financing events over the remaining life of the warrants to purchase common stock, or for certain re-measurement dates, due to the warrants being deeply in the money, the Black-Scholes option pricing model. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. At each reporting period, the Company evaluates the best valuation methodology. At September 30, 2017, the Black-Scholes option pricing model was used.

The Company measures eligible assets and liabilities at fair value, with changes in value recognized in earnings. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to re-measure any of its existing financial assets or liabilities, and did not elect the fair value option for any financial assets and liabilities transacted in the nine months ended September 30, 2017 or the year ended December 31, 2016.

9. Net Loss Per Share

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because their inclusion would have had an anti-dilutive effect (in thousands):


	Three and Six Months Ended June 30,
	2021		2020
Outstanding stock options	$	3,739	$	3,680
Common stock warrants	0		39
Shares issuable under employee stock purchase plan	9		13
Outstanding restricted stock units (1)	663		532
	$	4,411	$	4,264

(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note 14.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Outstanding stock options 3,459
3,193
3,459
3,193
Common stock warrants 64
397
64
397
Shares issuable under employee stock purchase plan 19
18
19
18
Outstanding restricted stock units 551
670
551
670
4,093
4,278
4,093
4,278

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10. Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive loss consists of net loss and other comprehensive ~~loss,~~income (loss), which includes certain changes in equity that are excluded from net loss. Comprehensive loss has been disclosed in the accompanying condensed consolidated statements of operations and comprehensive loss. Accumulated other comprehensive ~~loss~~income (loss) is presented separately on the condensed consolidated balance sheets and consists entirely of unrealized ~~holding~~holdings gains ~~and~~or losses on investments as of ~~September~~June 30, ~~2017~~ ~~and~~ ~~December 31, 2016~~.

~~11. Recent Accounting Pronouncements~~

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new standard will be effective for the Company on January 1, 2018. Topic 606 allows for either a full retrospective application, in which the standard is applied to all periods presented, or a modified retrospective application, in which the standard is applied to the most current period presented in the financial

statements. As of September 30, 2017, revenue is generated exclusively from the Company's collaboration agreement with Celgene. The Company is currently evaluating the potential impact that Topic 606 may have on its financial position and results of operations as it relates to this single arrangement, and expects to elect the modified retrospective application as its transition method.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842), Amendments to the FASB Accounting Standards Codification,~~ which replaces the existing guidance for leases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. This guidance is effective for annual and interim periods beginning after December 15, 2018 and requires retrospective application. The Company is currently assessing the impact that adopting ASU 2016-02 will have on its consolidated financial statements and related disclosures.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows - Restricted Cash (Topic 230)~~. This new standard requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017, and requires retrospective application. The Company is currently assessing the impact that adopting ASU 2016-18 will have on its consolidated financial statements and related disclosures.

~~In March 2017, the FASB issued ASU 2017-08,~~ ~~Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.~~ This new standard shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendment requires the premium to be amortized to the earliest call date. The amendment does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted. The amendment should be applied on a modified retrospective basis, with the cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact that adopting ASU 2017-08 will have on its consolidated financial statements and related disclosures.

~~12. Warrants~~

~~Below is a summary of the number of shares issuable upon exercise of outstanding warrants and the terms and accounting treatment for the outstanding warrants (in thousands, except per share data):~~

Warrants as of

Weighted-
Average
Exercise

Balance Sheet
Classification
September 30, 2017 December 31, 2016
Price Per
Share
Expiration September 30, 2017 December 31, 2016
Warrants to purchase common stock 61
61
$ 5.88
June 10, 2020 - July 9, 2020 Liability Liability
Warrants to purchase common stock 3
4
7.40
December 31, 2017 Equity(1) (2) Equity(1) (2)
All warrants 64
65
$ 5.94


~~(1)~~	~~In March 2017, warrant holders exercised warrants to purchase 1,187 shares of Common Stock on a net basis, resulting in the issuance of 1,014 shares of Common Stock.~~


~~(2)~~	~~Warrants to purchase common stock were issued in connection with various debt financing transactions that were consummated in periods prior to our initial public offering.~~

In connection with the Series E redeemable convertible preferred stock (Series E Preferred Stock) financing transactions that took place in June 2010 and July 2010, the Company issued warrants to purchase up to 871,580 shares of common stock. Each warrant was immediately exercisable and expires ten years from the original date of issuance. The warrants to purchase shares of the Company’s common stock have an exercise price equal to the estimated fair value of the underlying instrument as

of the initial date such warrants were issued. Each warrant is exercisable on either a physical settlement or net share settlement basis from the date of issuance. The warrant agreement contains a provision requiring an adjustment to the number of shares in the event the Company issues common stock, or securities convertible into or exercisable for common stock, at a price per share lower than the warrant exercise price. The Company concluded the anti-dilution feature required the warrants to be classified as liabilities under ASC Topic 815, ~~Derivatives and Hedging—Contracts in Entity’s Own Equity~~ (ASC 815). The warrants are measured at fair value, with changes in fair value recognized as a gain or loss to other income (expense) in the statements of operations and comprehensive loss for each reporting period thereafter. The fair value of the common stock warrants was recorded as a discount to the preferred stock issued, and the preferred stock was accreted to the redemption value. At the end of each reporting period, the Company re-measured the fair value of the outstanding warrants, using current assumptions, resulting in an increase in fair value of $0.4 million and $0.8 million for the three months ended September 30, 2017 and 2016, respectively, and an increase in fair value of $0.7 million and a decrease of $5.0 million for the nine months ended September 30, 2017 and 2016, respectively, which was recorded in other (expense) income in the accompanying consolidated statements of operations and comprehensive loss. The Company will continue to re-measure the fair value of the liability associated with the warrants to purchase common stock at the end of each reporting period until the earlier of the exercise or the expiration of the applicable warrants. All remaining outstanding warrants were fully vested and exercisable as of September 30, 20172021 and December 31, ~~2016.~~2020.

~~13.~~

11. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


	June 30, 2021		December 31, 2020
Prepaid clinical trial expenses	$	58,901	$	7,930
Accrued interest	1,782		345
Other prepaid and current assets	5,803		8,990
Total prepaid expenses and other current assets	$	66,486	$	17,265

12. Commitments and Contingencies

Operating Leases

The Company leases its facilities under non-cancelable operating leases that expire at various dates from September 2023 through May 2026. All of the Company's leases contain escalating rent clauses, which require higher rent payments in future years. See Note 2 and Note 14 in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the Company's operating leases.

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three and six months ended ~~September~~June 30, ~~2017,~~2021, and, to the best of its knowledge, no material legal proceedings are currently pending or threatened.

~~99 Erie Street Operating Lease~~

On March 16, 2017, the Company entered into an approximately six and a half year lease for approximately 11,825 square feet of rentable office and lab space located at 99 Erie Street, Cambridge, Massachusetts. The lease commenced on May 1, 2017 and ends on September 30, 2023. Excluding operating costs and real estate taxes, rent for the first year is $0.7 million with annual rent escalations thereafter. The total operating lease obligation for the term of this agreement, excluding operating costs and real estate taxes, is $5.1 million. The Company has the option to extend the lease by an additional three years. In accordance with the lease, the Company entered into a cash-collateralized, irrevocable standby letter of credit in the amount of $0.2 million, naming the landlord as beneficiary.

On July 27, 2017, the Company entered into a one-year sublease with Rubius Therapeutics, Inc. (the "sublessee") under which Rubius will sublease approximately 11,825 square feet of office and lab space at 99 Erie Street, Cambridge, Massachusetts (the "sublease"). The sublease commenced on August 1, 2017 and ends on July 31, 2018. The sublessee has the right to extend the sublease by an additional five months. The total operating lease obligation, excluding operating costs and real estate taxes, for the term of this agreement is approximately $0.7 million. In connection with this sublease, we recognized a loss of $0.1 million during the third quarter of 2017, which represents the difference between the Company's lease obligation to the landlord and the sublessee's lease obligation to the Company and other expenses associated with the sublease.

~~128/149 Sidney Street Operating Leases~~

On July 18, 2017, the Company entered into a five-year lease extension for approximately 37,700 square feet of office, manufacturing and lab space located at 128 Sidney Street, Cambridge, Massachusetts, our principal headquarters and manufacturing facility. The lease commences on October 1, 2018 and ends on September 30, 2023. The total operating lease obligation for the term of this agreement, excluding operating costs and real estate taxes, is approximately $13.0 million. The Company has the option to extend the lease by an additional five years.

~~On July 18, 2017, the Company entered into a five-year lease extension for approximately~~ ~~37,116~~ square feet of office and lab space located at 149 Sidney Street, Cambridge, Massachusetts. The lease commences on October 1, 2018 and ends on September 30, 2023. The total operating lease obligation for the term of this agreement, excluding operating costs and real estate taxes, is approximately ~~$12.8 million. The Company has the option to extend the lease by an additional five years.~~

Other

The Company is also party to various agreements, principally relating to licensed technology, that require future payments relating to milestones ~~which had~~ not ~~been~~ met at ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, or royalties on future sales of

specified products. ~~No milestones or royalty payments under these agreements are expected to be payable in the immediate future.~~ See Note 1413 for discussion of these arrangements.

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

~~14.~~

Table of Contents

13. Significant Agreements

~~Celgene~~BMS (Bristol Myers Squibb Company)

Overview

On February 20, 2008, the Company entered into ~~a collaboration, license, and option~~an agreement with Celgene, ~~Corporation (Celgene)~~which was acquired by BMS in November 2019 and is now referred to herein as BMS, relating to sotatercept (the Original Sotatercept Agreement), which ~~the Company and Celgene~~was amended on August 2, 2011 (as amended, the ~~Original~~Amended Sotatercept Agreement)~~, and then~~. The Company further amended and restated the Original Sotatercept Agreement in its entirety on September 18, 2017, ~~(as amended~~ and ~~restated,~~clarified certain responsibilities of the Company and BMS in a letter agreement to the Restated Sotatercept Agreement on March 10, 2020 (collectively, the Restated Sotatercept Agreement). On August 2, 2011, the Company entered into a second ~~collaboration, license and option~~ agreement with ~~Celgene~~BMS for ~~luspatercept~~REBLOZYL® (luspatercept-aamt) (the REBLOZYL Agreement, formerly the Luspatercept Agreement). These agreements provide Celgene an exclusive license to luspatercept in all indications, an exclusive license to sotatercept outside of the pulmonary hypertension (PH) field, as well as exclusive rights to obtain a license to certain future compounds.

Since December 31, ~~2016,~~2020, there have been no material changes to the key terms of the ~~Luspatercept Agreement, and the material changes to the Original Sotatercept Agreement pursuant to the Restated Sotatercept Agreement are described below.~~above agreements. For further information on the terms of the agreements, ~~as well as the historical accounting analysis,~~ please see the notes to the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2020.

~~Restated Sotatercept Agreement~~Accounting Analysis

~~Under the Restated Sotatercept Agreement, Celgene granted the Company worldwide rights to develop and commercialize sotatercept for the treatment, prevention, modulation and diagnosis~~

Upon adoption of pulmonary hypertension in humans. In addition, Celgene agreed not to develop or commercialize in the field of pulmonary hypertension any compound developed under the Restated Sotatercept Agreement or the Luspatercept Agreement, and the Company agreed not to develop or commercialize any compound developed under the Restated Sotatercept Agreement or the Luspatercept Agreement in any field outside of pulmonary hypertension. The Company has the right to license, transfer or sell its rights to develop and commercialize sotatercept in pulmonary hypertension, subject to Celgene’s right of first negotiation.

~~The Company is responsible for 100%~~ASC 606, all of the ~~costs~~Company’s performance obligations pursuant to its arrangements with BMS were completed and all remaining potential milestone payments were fully constrained as they related to the Company’s development and commercialization of sotatercept in pulmonary hypertension. The Company is not required to make any upfront payments or milestone payments to Celgene in connection with the Company’s development and commercialization of sotatercept in pulmonary hypertension. If sotatercept is commercialized to treat pulmonary hypertension and the Company recognizes such revenue, then Celgene will be eligible to receive a royalty in the low 20% range on global net sales. In certain circumstances Celgene may recognize revenue related to the commercialization of sotatercept in pulmonary hypertension, and in this scenario, the Company will be eligible to receive a royalty from Celgene suchfuture regulatory events that the economic position of the parties is equivalent to the scenario in which the Company recognizes such revenue. With respect to the development and commercialization of sotatercept outside of pulmonary hypertension or the development and commercialization of any other compound under the Restated Sotatercept Agreement, the terms of the Original Sotatercept Agreement remain unchanged, and Celgene will continue to have responsibility to fund and conduct all such development and commercialization activities, with the Company eligible to receive tiered royalty payments in the low-to-mid 20% range on global net sales.

Pursuant to the Restated Sotatercept Agreement, Celgene will provide to the Company certain quantities of Celgene’s existing clinical supply of sotatercept at no cost to the Company. For clinical or commercial supply of sotatercept in excess of that which is agreed under the Restated Sotatercept Agreement, Celgene can elect to provide the Company with such clinical and commercial supply of sotatercept at a negotiated price or provide a tech transfer to the Company to enable the Company to manufacture on its own behalf. The conduct of the collaboration is managed by a Joint Development Committee and Joint Commercialization Committee. In the event of a deadlock of a committee, the Company shall determine the resolution of issues specifically related to the development or commercialization of sotatercept in pulmonary hypertension (other than pricing which shall be determined by consensus), and Celgene shall determine the resolution of all other issues. The Joint

Commercialization Committee will oversee commercialization of sotatercept and sotatercept pricing will be determined by mutual agreement of the Company and Celgene in the Joint Commercialization Committee.

The Restated Sotatercept Agreement is terminable by either party upon a breach that is uncured and continuing or by Celgene for convenience on a country by country or product by product basis, or in its entirety. Celgene may also terminate the Restated Sotatercept Agreement, in its entirety or on a product by product basis, for failure of a product to meet a development or clinical trial endpoint. Termination for cause by us or termination by Celgene for convenience or failure to meet an endpoint will have the effect of terminating the applicable license to Celgene and the rights granted to the Company with respect to the development of sotatercept in pulmonary hypertension shall become irrevocable. Termination for cause by either party shall result in reducing the remaining royalties due to the breaching party by a certain percentage. Upon termination by Celgene for convenience or for failure to meet an endpoint, Celgene and the Company will enter into a termination agreement pursuant to which, among other things, Celgene will continue to be eligible to receive a royalty in the low 20% range on global net sales of sotatercept in pulmonary hypertension.

~~The Company and Celgene will continue to collaborate worldwide for the joint development and commercialization of sotatercept~~were outside of the ~~pulmonary hypertension field. The Company also previously granted Celgene an option to license three discovery stage compounds under~~Company’s control, and therefore the ~~Original Sotatercept Agreement.~~

~~The Company retained responsibility for research and development~~risk of ~~sotatercept outside~~significant reversal in the amount of cumulative revenue had not been resolved. As of June 30, 2021, the pulmonary hypertension field through the end of Phase 2a clinical trials, as well as manufacturing the clinical supplies for these trials. These activities were substantially completed in 2011. Outside of pulmonary hypertension, Celgene will also be responsible for any Phase 3 clinical trials, as well as additional Phase 2 clinical trials, and will be responsible for overseeing the manufacture of Phase 3 and commercial supplies by third party contract manufacturing organizations.

Through September 30, 2017, the Company has received $44.1 million in research and development funding and milestone payments for sotatercept under the original and amended and restated agreements. The next likely clinicallast remaining regulatory milestone payment for REBLOZYL would be ~~$10.0~~$20.0 million and would result from ~~Celgene’s start of~~approval by a ~~Phase 3 study.~~

~~Luspatercept Agreement~~

~~Under~~regulatory authority in Asia (as defined in the terms of the Luspatercept Agreement, the Company and Celgene collaborate worldwide for the joint development and commercialization of luspatercept. The Company also granted Celgene an option for future products for which the Company files an Investigational New Drug application for the treatment of anemia. The Company has not yet identified additional compounds for the treatment of anemia. Accordingly, there is no assurance that the Company will generate future value from additional programs.

The Company retains responsibility for research and development through the end of Phase 1 and initial Phase 2 clinical trials, as well as manufacturing the clinical supplies for these studies. Celgene will conduct any subsequent Phase 2 and Phase 3 clinical studies. The Company will manufacture luspatercept for the Phase 1 and Phase 2 clinical trials and Celgene will be responsible for overseeing the manufacture of Phase 3 and commercial supplies by third party contract manufacturing organizations.

Through September 30, 2017, the Company has received $96.6 million in research and development funding and milestone payments for luspatercept. The next likely milestone payment would be $25.0 million and result from U.S. Food and Drug Administration or European Medical Association acceptanceREBLOZYL Agreement) of a Biologics ~~Licensing~~License Application (BLA) or equivalent for ~~luspatercept~~luspatercept-aamt in either myelodysplastic syndromes or beta-thalassemia.

~~Both Agreements~~

~~Under both agreements, Celgene~~ In accordance with the Company's accounting policy regarding revenue recognition as described in Note 2 to its Annual Report on Form 10-K, the revenue associated with this milestone will be recognized once it is ~~responsible for paying 100% of worldwide development costs and 100% of any commercialization costs worldwide for sotatercept (outside~~probable that the application is approved by the regulatory authority. Milestone payments that are not within the control of the ~~pulmonary hypertension field) and luspatercept.~~Company or the licensee are not considered probable of being achieved until those approvals are received. The ~~Company has the right to co-promote sotatercept (outside~~approval of the ~~pulmonary hypertension field), luspatercept and future products in North America. The Company will receive tiered royalties in~~application is not within the ~~low-to-mid 20% range on net sales of sotatercept (outside~~control of the ~~pulmonary hypertension field)~~Company or the licensee, and ~~luspatercept, and these royalty schedules are the same for both agreements.~~

~~Accounting Analysis~~

~~As a result~~therefore, as of ~~the changes to the economic terms under the Restated Sotatercept Agreement,~~June 30, 2021, the Company ~~concluded~~cannot determine if it is probable that a regulatory agency will approve the modification did not represent a material modification under ASU 2009-13. Further, the Company concluded there are no new deliverables which arise from the agreement. There have been no material changes to the accounting under the Luspatercept Agreement, or the Original Sotatercept Agreement pursuant to the Restated Sotatercept Agreement. For further information onapplications.

~~the historical accounting analysis, please see the notes to the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2016.~~

During the three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, the Company recognized ~~$0.1 million~~milestone, cost-sharing, and ~~$0.1 million, respectively, and during~~royalty revenue pursuant to the ~~nine months ended September 30, 2017 and 2016, $0.4 million and $0.4 million, respectively, of~~BMS arrangements, as presented on the ~~total deferred revenue as license and milestone revenue in the accompanying~~condensed consolidated statements of operations and comprehensive loss.

~~As noted above,~~ Through June 30, 2021, under ~~the terms of the Luspatercept Agreement~~all BMS arrangements, the Company ~~retained responsibility for certain research~~has received net cost-share payments, milestones, and ~~development activities. In November 2013, the Company agreed to conduct additional activities for the benefit~~royalties of the luspatercept program including certain clinical and non-clinical services. These activities are reimbursed under the same terms and rates of the existing Agreements and are accounted for as the services are delivered.

Pursuant to the terms of the agreements, Celgene and the Company shared development costs incurred by either party, with Celgene responsible for substantially more than half of the costs for sotatercept and luspatercept until December 31, 2012. Beginning January 1, 2013, Celgene is responsible for 100% of the costs for luspatercept and for sotatercept outside of the pulmonary hypertension field. Payments from Celgene with respect to research and development costs incurred by the Company are recorded as cost-sharing revenue. The Company recorded net cost-sharing revenue of $2.9$307.4 million and ~~$2.9~~$45.1 million ~~during the three months ended September 30, 2017~~for REBLOZYL and ~~2016, respectively, and $9.4 million and $9.0 million during the nine months ended September 30, 2017 and 2016,~~sotatercept, respectively.

Other Agreements

~~Other~~

In 2004, the Company entered into a license agreement with a non-profit institution for an exclusive, sublicensable, worldwide, royalty-bearing license to certain patents developed by the institution (Primary Licensed Products). In addition, the Company was granted a non-exclusive, non-sub-licensable license for Secondary Licensed Products. As compensation for the licenses, the Company issued 62,500 shares of its common stock to the institution, the fair value of which was $25 thousand, and was expensed during 2004 to research and development expense. The Company ~~also~~ agreed to pay specified development milestone payments totaling up to $2.0 million for sotatercept and $0.7 million for ~~luspatercept.~~REBLOZYL. In addition, the Company is obligated to pay milestone fees based on the Company’s research and development progress, and U.S. sublicensing revenue ranging from 10%-25%, as well as ~~a royalty~~royalties ranging from 1.0%-3.5% of net sales on any products developed under the licenses. During the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, the Company expensed ~~zero~~0 and ~~zero,~~$1.5 million, respectively, of milestones and fees. During the six months ended June 30, 2021 and 2020, the Company expensed 0 and $1.8 million, respectively, of milestones and fees. Milestones and fees associated with development related activities are recorded as research and development expense. During the three months ended June 30, 2021 and 2020, the Company expensed $1.3 million and $0.6 million, respectively, and during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively,~~2020, the Company expensed ~~$0.1~~$2.5 million and ~~$1.0~~$0.7 million, respectively, of ~~milestones~~royalties. Costs related to royalties on sales of commercial products are recorded as selling, general and ~~fees defined under the agreement.~~administrative expense.

In May 2014, the Company executed a collaboration agreement with a research technology ~~company.~~company, and such collaboration agreement was amended and restated in March 2019. The Company paid an upfront research fee of $0.3 million upon execution of the original agreement. The Company also received an option to obtain a commercial license to the molecules developed during the collaboration. During the three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, the Company expensed ~~$0.9 million~~0 and ~~$0.4 million, respectively, and during the nine months ended September 30, 2017 and 2016, the Company expensed $1.2 million and $0.9~~$0.5 million, respectively, of milestones and fees, which is recorded as research and development expense.

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~~15. Stockholders' Equity~~

~~On September 25, 2017,~~In December 2019, the Company ~~completed its underwritten public offering~~executed a license and collaboration agreement with Fulcrum Therapeutics to identify small molecules designed to modulate specific pathways associated with a targeted indication within the pulmonary disease space. The Company paid an upfront research fee of ~~5,405,406 shares~~$10.0 million upon execution of ~~common stock at~~this agreement, which was expensed to research and development. The Company also agreed to pay specified research, development and commercial milestone payments of up to $295.0 million for a ~~public offering price~~first product commercialized and up to a maximum of ~~$37.00~~ ~~per share. The aggregate~~$143.5 million in additional milestone payments for all subsequent products commercialized. Fulcrum will additionally receive tiered royalty payments in the mid-single-digit to low double-digit range on net ~~proceeds received by~~sales, as well as reimbursement for relevant research and development costs. During the three months ended June 30, 2021 and 2020, the Company ~~after underwriting discounts~~expensed $0.6 million and ~~other estimated offering expenses, were approximately~~ ~~$187.6~~$0.8 million,. respectively, and during the six months ended June 30, 2021 and 2020, the Company expensed $1.1 million and $1.1 million, respectively, of milestones and fees, which is recorded as research and development expense.

~~On October 4, 2017,~~

14. Stock-Based Compensation

During the quarter ended March 31, 2021, the Company updated the equity award agreements with respect to the 2013 Equity Incentive Plan (the 2013 Plan) to enhance the vesting terms for retirement eligible employees and directors for awards granted in ~~connection~~2021 and future awards. Where awards are granted with ~~the public offering of common stock on September 20, 2017, the underwriters~~non-substantive vesting periods (for instance, where all or a portion of the ~~Company's public offering fully exercised their over-allotment option~~award continues to ~~purchase an additional 810,810 shares of~~vest upon retirement eligibility), the ~~Company's common stock at~~Company recognizes expense based on the ~~public offering price of $37.00 per share, less underwriting discounts and commissions, resulting in additional net proceeds of approximately $28.2 million.~~

~~16. Stock-Based Compensation~~period from the grant date to the date the employee becomes retirement eligible.

The Company recognized stock-based compensation expense related to the 2003 Stock Option and Restricted Stock Plan (the 2003 Plan), the 2013 ~~Equity Incentive~~ Plan, ~~(the 2013 Plan),~~ and the 2013 Employee Stock Purchase Plan (the 2013 ESPP) ~~totaling $5.7 million, $4.6 million, $21.9 million, and $13.4 million during~~in the ~~three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016, respectively.~~

~~Total compensation cost recognized for all stock-based compensation awards in the~~condensed consolidated statements of operations and comprehensive loss isduring the three and six months ended June 30, 2021 and 2020, respectively, as follows (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Research and development $ 3,173
$ 1,942
$ 10,268
$ 5,617
General and administrative 2,533
2,646
11,609
7,770
$ 5,706
$ 4,588
$ 21,877
$ 13,387

On January 1, 2017, the Company adopted ASU 2016-09, which identifies areas for simplification involving several aspects of accounting for share-based payments, including income tax consequences, classification of awards as either equity or liabilities, an option to make a policy election to recognize gross share based compensation expense with actual forfeitures recognized as they occur as well as certain classification changes on the statement of cash flows. In connection with the adoption of this standard, the Company changed its accounting policy to record actual forfeitures as they occur, rather than estimating forfeitures by applying a forfeiture rate. The provisions of the standard related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures were adopted using a modified retrospective transition method. Accordingly, a cumulative adjustment of $0.1 million was booked to retained earnings for the impact of the forfeitures. The Company also recorded $21.5 million for the excess tax benefit related to equity awards, which was offset by a $21.5 million increase to the valuation allowance. The provisions of the standard related to the recognition of the excess tax benefits in the income statement and classification in the statement of cash flows were adopted prospectively and prior periods were not retrospectively adjusted.

In December 2016, the Company entered into a consulting agreement with its former Chief Executive Officer. In accordance with the 2003 Plan and 2013 Plan, any vested shares remain exercisable and any outstanding and unvested options and restricted stock units will continue to vest in accordance with their terms so long as he continues to provides services as a non-employee consultant. During the three and nine months ended September 30, 2017, the Company recognized $1.0 million and $3.1 million of stock-based compensation expense within research and development expense associated with these awards.

In April 2017, the Company amended the employment agreement with its former Chief Operating Officer as a result of his diagnosis of amyotrophic lateral sclerosis (ALS). The amended agreement modified the vesting conditions of his stock options and restricted stock units in the event his termination of employment as a result of death or disability and extended the post termination exercise period of the options. These modifications resulted in zero and $3.6 million of stock-based compensation, recognized within general and administrative expense during the three and nine months ended September 30, 2017, respectively.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Research and development	$	5,876	$	3,259	$	14,032	$	6,400
Selling, general and administrative	7,603		3,881		15,073		7,419
	$	13,479	$	7,140	$	29,105	$	13,819

Stock Options

~~The fair value of each stock option issued to employees was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Expected volatility 65.1 % 65.4 % 65.8 % 64.5 %
Expected term (in years) 6.0
6.0
6.0
5.9
Risk-free interest rate 1.9 % 1.2 % 2.1 % 1.4 %
Expected dividend yield — % — % — % — %

The following table summarizes the stock option activity under the Company’s ~~2003 Plan and 2013 Plan~~stock option plans during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 (in thousands, except per share amounts and years):


	Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2020	3,378	$	49.78	7.35	$	264,046
Granted	672	$	118.71
Exercised	(250)	$	39.77
Canceled or forfeited	(61)	$	77.50
Outstanding at June 30, 2021	3,739	$	62.39	7.43	$	236,601
Exercisable at June 30, 2021	1,863	$	42.57	6.21	$	154,466

Number
of Stock Options

Weighted-
Average
Exercise
Price
Per Share

Weighted-
Average
Contractual
Life (in years)

Aggregate
Intrinsic
Value(1)
Outstanding at December 31, 2016 3,316
$ 25.96
7.03
Granted 669
$ 30.51

Exercised (442 ) $ 7.32

Canceled or forfeited (84 ) $ 34.16

Outstanding at September 30, 2017 3,459
$ 29.02
6.99 $ 32,169
Exercisable at September 30, 2017 1,907
$ 25.88
5.55 $ 24,324


~~(1)~~	(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated ~~fair value of the common stock for the options that were in the money at September 30, 2017.~~

~~During the nine months ended September 30, 2017, the Company granted stock options to purchase an aggregate of 669,184 shares of its common stock, with a weighted-average grant date~~ fair value of the common stock for the options ~~granted of $18.44 per share.~~

~~During~~that were in the ~~nine months ended September~~money at June 30, ~~2017, current and former employees of the Company exercised a total of 441,842 options, resulting in total proceeds of $3.2 million.~~ 2021.

The aggregate intrinsic value of options exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 was ~~$9.5~~$22.3 million.

As of ~~September~~June 30, ~~2017,~~2021, there was ~~$25.4~~approximately $70.0 million of unrecognized compensation expense related to unvested stock options that is expected to be recognized over a remaining weighted-average period of ~~2.57~~2.61 years.

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Restricted Stock Units

The following table summarizes the restricted stock unit (RSU) activity under the 2013 Plan during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 (in thousands, except per share amounts):


	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2020	494	$	59.16
Granted	197	$	117.45
Vested	(169)	$	46.05
Forfeited	(15)	$	77.45
Unvested balance at June 30, 2021	507	$	85.65

Number
of RSUs Weighted-
Average
Grant Date Fair Value Per Share
Unvested balance at December 31, 2016 732
$ 31.55
Granted 129
$ 29.53
Vested (289 ) $ 31.00
Forfeited (21 ) $ 32.27
Unvested balance at September 30, 2017 551
$ 31.34

~~During the nine months ended September 30, 2017, the Company issued 100,692 RSUs to employees which are subject to time-based vesting.~~ As of ~~September~~June 30, ~~2017, 214,120 of these restricted stock units remained unvested and outstanding, and~~2021, there was approximately ~~$4.7~~$33.1 million of ~~related~~ unrecognized compensation ~~cost, which the Company expects~~expense related to ~~recognize~~RSUs that is expected to be recognized over a remaining weighted-average period of ~~1.63~~1.86 years.

~~During the nine months ended September 30, 2017,~~Performance-Based Restricted Stock Units

On January 22, 2020, the Company ~~issued 28,333 RSUs to employees which are subject to~~granted performance-based restricted stock units (PSU) whereby vesting ~~conditions, and vesting accelerates~~depends upon the occurrence of certain milestone ~~events. In September 2019, any~~events by December 31, 2022 (the 2020 PSUs). When achievement of ~~these unvested RSUs will vest. As a result, when~~ a milestone event becomes probable, compensation cost iswill be recognized from the grant date ~~through~~over the ~~estimated date~~requisite service period and a cumulative catch-up adjustment will be recorded to reflect the portion of the employees' requisite service that has been provided to date. During the three months ended June 30, 2021, stock-based compensation expense of $1.9 million related to the 2020 PSUs was recognized for one of the milestone events deemed probable of achievement. IfThe expense associated with these PSUs will continue to be recognized through December 31, 2022. For the remaining two milestone events which were not deemed probable of achievement, ~~is not considered~~no stock-based compensation expense was recognized.

On January 29, 2021, the Company granted performance-based restricted stock units (PSU) whereby vesting depends upon the occurrence of certain milestone events by December 31, 2023 (the 2021 PSUs). When achievement of a milestone event becomes probable, ~~the expense is~~compensation cost will be recognized from the grant date ~~through September 2019.~~over the requisite service period and a cumulative catch-up adjustment will be recorded to reflect the portion of the employees' requisite service that has been provided to date. As of ~~September~~June 30, ~~2017, 337,122~~2021, none of ~~these performance-based RSUs remained outstanding,~~the milestone events related to the 2021 PSUs had been deemed probable of being achieved.

The following table summarizes PSU activity under the 2013 Plan during the six months ended June 30, 2021 (in thousands, except per share amounts):


	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2020	75	$	52.99
Granted (1)	83	$	115.53
Vested	0	$	0
Forfeited	(2)	$	52.99
Unvested balance at June 30, 2021	156	$	86.01

(1)Pursuant to the terms of the awards granted, the actual number of awards earned could range between 0% and 200% of the number of awards granted.

As of June 30, 2021, there was approximately ~~$5.6~~$11.5 million of related unrecognized compensation ~~cost, which~~cost. Depending on the ~~Company expects to recognize over a remaining weighted-average period~~actual number of ~~1.66 years.~~milestone events achieved, the actual expense recognized could range between 0% and 200% of the total target value awarded on the grant date.

~~Employee Stock Purchase Plan~~

~~The Company recorded stock-based compensation expense related to the ESPP Plan during the three months ended September 30, 2017 and 2016~~

Table of ~~$0.1 million and $0.1 million, respectively, and during the nine months ended September 30, 2017 and 2016 of $0.2 million and $0.2 million, respectively.~~Contents

~~17.~~15. Income Taxes

~~For~~

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the ~~three months and nine months ended September 30, 2017, the Company recognized an income tax benefit of $41 thousand and $29 thousand~~financial reporting and tax ~~expense in other comprehensive loss~~basis of ~~$59 thousand~~assets and ~~$59 thousand related to the unrealized gain on available-for-sale securities. At September 30, 2017, the Company~~liabilities using statutory rates. A valuation allowance is recorded an accrued tax provision of $17 thousand related to this tax benefit included within accrued expenses and other current liabilities in the condensed consolidated balance sheet, which is expected to be generated from continuing operations.

For the three and nine months ended September 30, 2016, the Company recognized an income tax benefit of $20 thousand and $20 thousand and tax expense in other comprehensive loss of $53 thousand and $53 thousand related to the unrealized gain on available-for-sale securities. At September 30, 2016, the Company recorded an accrued tax provision of $17 thousand related to this tax benefit included within accrued expenses and other current liabilities in the condensed consolidated balance sheet, which is expected to be generated from continuing operations.

~~The Company has evaluated the positive and negative evidence bearing upon the realizability of its~~against deferred tax ~~assets. Based on the Company’s history of operating losses, the Company has concluded that~~assets if it is more likely than not that ~~the benefit~~some or all of ~~its~~the deferred tax assets will not be realized. ~~Accordingly,~~Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has ~~provided~~recorded a full valuation allowance ~~for~~against the Company’s otherwise recognizable net deferred tax ~~assets as of September 30, 2017 and December 31, 2016.~~assets.

The Company files income tax returns in the United States, and various state jurisdictions. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2013 through December 31, 2016. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state taxing authorities to the extent utilized in a future period.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2017 and December 31, 2016, the Company did not have any significant uncertain tax positions.

~~18.~~16. Related Party Transactions

~~Celgene Corporation~~BMS

~~In connection with the Company's September 2017 public offering, Celgene purchased 745,592 shares of common stock. In connection with this~~BMS owned 10.7% and ~~prior transactions, Celgene owned 12.7% and 12.9%~~10.8% of the Company’s fully diluted equity as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. Refer to Note 1413 for additional information regarding this collaboration arrangement.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, all revenue recognized by the Company was recognized under the ~~Celgene~~BMS collaboration ~~arrangement and, as of September 30, 2017,~~arrangement.

17. Subsequent Events

The Company considers events or transactions that occur after the ~~Company had $3.8 million of deferred revenue related~~balance sheet date but prior to the ~~Celgene collaboration arrangement.~~issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure.

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

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "plan," "potential," "predict," "project," "should," "strategy," "target," "vision," "will," "would," or, in each case, the negative or other variations thereon or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:

•the impact on our business of the COVID-19 pandemic and the government’s efforts to contain it;

•our ongoing and planned preclinical studies and clinical trials;

•clinical trial data and the timing of results of our ongoing clinical trials;

•our plans to develop and commercialize ~~ACE-083~~sotatercept in pulmonary hypertension, ACE-1334, and our other ~~preclinical~~potential therapeutic ~~candidates,~~ candidates;

•our and ~~Celgene’s~~Bristol Myers Squibb's, or BMS's, plans to develop and commercialize ~~luspatercept~~REBLOZYL® (luspatercept-aamt) and ~~sotatercept;~~ sotatercept outside of pulmonary hypertension;

•the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnership arrangements;

•the timing of anticipated milestone payments under our collaboration agreements with ~~Celgene;~~BMS;

•the timing of, and our ~~and Celgene’s~~and/or BMS's ability to, obtain and maintain regulatory approvals for our therapeutic candidates;

•the rate and degree of market acceptance and clinical utility of any approved therapeutic candidate, particularly in specific patient populations;

•our ability to quickly and efficiently identify and develop therapeutic candidates;

•our ~~commercialization, marketing and~~ manufacturing capabilities and strategy;

•our plans for commercialization and marketing;

•our intellectual property position; and

•our estimates regarding our ~~operating capital requirements,~~ results of operations, financial condition, liquidity, capital requirements, prospects, growth and strategies.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and industry ~~changes~~change and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and events in the industry in which we operate may differ materially from the forward-looking statements contained herein.

Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of such statements, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

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You should also read carefully the factors described in the section “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, press releases, and our website.

You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1“Financial Statements” and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are a ~~leading~~ biopharmaceutical company indedicated to the discovery, development and ~~development~~commercialization of ~~TGF-beta~~ therapeutics to treat serious and rare diseases. Our research focuses on key natural regulators of cellular growth and repair, particularly the ~~transforming growth factor-beta,~~Transforming Growth Factor-Beta, or TGF-beta, protein superfamily. By combining our discovery and development expertise, including our proprietary knowledge of the TGF-beta superfamily, and our internal protein engineering and manufacturing capabilities, we ~~have generated several~~generate innovative therapeutic candidates, all of which encompass novel potential first-in-class mechanisms of action. ~~We have focused and prioritized our research and development activities within three key therapeutic areas: hematology, neuromuscular and pulmonary.~~ If successful, these candidates could have the potential to significantly improve clinical outcomes for patients across these areas of high, unmet need.

~~Luspatercept,~~We focus and prioritize our commercialization, research and development activities within two key therapeutic areas: pulmonary and hematology.

Pulmonary

We are actively developing our lead pulmonary program, ~~and~~ sotatercept, are partnered with Celgene Corporation, or Celgene. Luspatercept is designed to promote red blood cell production through a novel mechanism, and is being developed to treat chronic anemia and associated complications in myelodysplastic syndromes, or MDS, beta-thalassemia, and myelofibrosis. Celgene is currently conducting two Phase 3 clinical trials with luspatercept; one for the treatment of patients with ~~lower risk MDS, known as~~pulmonary arterial hypertension, or PAH. Sotatercept is generally partnered with Bristol Myers Squibb, or BMS, (which acquired Celgene Corporation in November 2019), but we retain the "MEDALIST" trial, and another for the treatment of patients with transfusion-dependent beta-thalassemia, also known as the "BELIEVE" trial. Celgene recently initiated a Phase 2 clinical trial for the treatment of patients with myelofibrosis, a rare bone marrow disorder, and we expect Celgene to enroll the first patient in this study by the end of this year. We further expect Celgene to initiate a Phase 3 clinical trial, the "COMMANDS" trial, in first-line, lower-risk MDS patients in first half of 2018. In addition, a Phase 2 trial in non-transfusion-dependent beta-thalassemia patients, referred to as the "BEYOND" trial, is in the planning stages and we expect Celgene to initiate the BEYOND trial by the end of this year.

~~For sotatercept, we recently announced that Celgene granted~~exclusive rights ~~to us~~ to fund, develop, and lead the global commercialization of sotatercept in pulmonary ~~arterial~~ hypertension, orwhich we refer to as the PH field, and that includes PAH. PAH is a rare and chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in the pulmonary arteries.

In June 2020, we presented results of the PULSAR Phase 2 trial of sotatercept in patients with PAH on stable background PAH-specific therapies during the "Breaking News: Clinical Trials in Pulmonary Medicine" session of the American Thoracic Society, or ATS, 2020 Virtual Conference. Study investigators reported that the trial met its primary endpoint, pulmonary vascular resistance, and its key secondary endpoint, six-minute walk distance, and showed concordance of results across multiple additional endpoints and regardless of baseline characteristics. Sotatercept was generally well tolerated in the trial and adverse events observed in the study were generally consistent with previously published data on sotatercept in clinical trials in other patient populations. We ~~expect~~presented additional cardiac and pulmonary function data at the virtual 2020 American Heart Association Scientific Sessions in November 2020 showing improvement in right ventricular-pulmonary arterial (RV-PA) coupling, which represents the match between the output of the RV and the resistance of the pulmonary vasculature, as well as improvement in RV function. In May 2021, we presented interim results from the ongoing 18-month open-label extension of the PULSAR trial at the ATS 2021 International Conference showing consistent or improved patient responses in multiple efficacy endpoints when treated with sotatercept for up to 48 weeks. We initiated our registrational Phase 3 trial, the STELLAR trial, in patients with PAH at the end of 2020, and start-up activities are underway for the early intervention Phase 3 HYPERION trial in patients with PAH and the later intervention Phase 3 ZENITH trial in World Health Organization (WHO) functional class IV PAH patients, each of which we plan to initiate ain the second half of 2021. In addition, we plan to initiate the Phase 2 ~~clinical~~CADENCE trial in patients with pulmonary hypertension with left heart disease in the second half of 2021.

We have completed enrollment in an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH. We presented preliminary interim results in November 2020 at the virtual 2020 American Heart Association Scientific Sessions, and we presented additional preliminary interim results at the ATS 2021 International Conference, in each case showing improvements in multiple hemodynamic measures in the first 10 patients evaluated among the total of 21 trial participants. We also previously announced that the U.S. Food and Drug Administration, or FDA, has granted Breakthrough Therapy designation to sotatercept for the treatment of patients with PAH, and that the European Medicines Agency, or EMA, has granted Priority Medicines, or PRIME, designation to sotatercept for the treatment of patients with PAH. In December 2020, the European Commission granted Orphan Drug designation to sotatercept for the treatment of patients with PAH.

If sotatercept is approved and commercialized to treat PAH, then we will recognize revenue from global net sales and owe BMS a royalty in the low 20% range.

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In addition to sotatercept, we are currently advancing our second pulmonary therapeutic candidate, ACE-1334. ACE-1334 is a wholly owned TGF-beta superfamily-based ligand trap designed to bind and inhibit TGF-beta 1 and 3 ligands but not TGF-beta 2. We recently completed an ascending-dose Phase 1 clinical trial in healthy volunteers, and the FDA has granted Fast Track designation to ACE-1334 in patients with systemic sclerosis-associated interstitial lung disease, or SSc-ILD, as well as Orphan Drug designation for the treatment of systemic sclerosis. SSc-ILD is a rare, progressive, autoimmune connective tissue disorder characterized by immune dysregulation. We intend to initiate a Phase 1b/Phase 2 clinical trial with ACE-1334 in patients with SSc-ILD by the end of 2021.

Hematology

Our first ~~half~~commercial product, REBLOZYL® (luspatercept-aamt), is a first-in-class erythroid maturation agent designed to promote red blood cell, or RBC, production through a novel mechanism, and is partnered with BMS. REBLOZYL is currently approved to treat certain adult patients with beta-thalassemia or MDS in the United States, European Union and Canada, as further described in the "Business" section in our Annual Report on Form 10-K for the year ended December 31, 2020.

For additional patient populations, BMS is currently conducting a Phase 2 clinical trial with luspatercept-aamt in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, and a Phase 3 clinical trial, the COMMANDS trial, in first-line, lower-risk MDS patients. In June 2021, we and BMS announced the first results from the BEYOND trial showing that luspatercept-aamt plus best supportive care improved anemia in 77% of ~~2018.~~patients compared to placebo, and luspatercept-aamt was generally well tolerated. Topline results from the COMMANDS trial are expected in or after 2022. In myelofibrosis, BMS is conducting a Phase 2 clinical trial with luspatercept-aamt in patients with myelofibrosis-associated anemia, and has initiated the Phase 3 INDEPENDENCE study in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions.

~~Celgene~~We believe that there is a global annual peak sales opportunity for REBLOZYL in excess of $4 billion for all currently approved indications and those in development, including future clinical development expansion.

BMS is responsible for paying 100% of the development costs for all clinical trials for ~~luspatercept as well as clinical trials with sotatercept, outside of pulmonary hypertension.~~luspatercept-aamt. We may receive a maximum of ~~$545.0~~$100.0 million for ~~the~~remaining potential ~~development,~~ regulatory and commercial milestone payments. ~~If luspatercept~~We have a co-promotion right in North America and our commercialization costs provided in the commercialization plan and budget approved by the Joint Commercialization Committee, or JCC, are entirely funded by BMS. Activities that we elect to conduct outside of ~~pulmonary hypertension, sotatercept,~~the approved development or commercialization budgets to support REBLOZYL are ~~commercialized, we~~at our own expense. We are eligible to receive atiered royalty payments from BMS on net sales of REBLOZYL in the low-to-mid 20% range. ~~We have the right to co-promote luspatercept~~

Funding and outside of pulmonary hypertension, sotatercept, if approved, in North America, for which our commercialization costs will be entirely funded by Celgene. With regard to sotatercept in pulmonary hypertension, we have the right to fund and conduct all development and commercialization activities. If sotatercept is commercialized to treat pulmonary hypertension and we recognize such revenue, then Celgene will be eligible to receive a royalty in the low 20% range on global net sales. In certain circumstances Celgene may recognize revenue related to the commercialization of sotatercept in pulmonary hypertension, and in this scenario we will be eligible to receive a royalty from Celgene such that the economic position of the parties is equivalent to the scenario in which we recognize such revenue.

We are independently developing our wholly-owned neuromuscular candidate, ACE-083. ACE-083 is designed for the treatment of focal muscle loss disorders, and we are currently conducting a Phase 2 clinical trial with ACE-083 in patients with facioscapulohumeral dystrophy, or FSHD, as well as a Phase 2 clinical trial with ACE-083 in patients with Charcot-Marie-Tooth disease, or CMT. We expect to report part 1 preliminary results from dose cohort 1 of our Phase 2 clinical trial in patients with FSHD in January 2018, and we expect to report preliminary results from part 1 of all dose-escalation cohorts in both of our Phase 2 clinical trials with ACE-083 in 2018. We previously reported data from the Phase 1 clinical trial of ACE-083 showing marked increases in the volume of muscles treated with ACE-083, measured using magnetic resonance imaging or MRI.

In addition to our clinical programs, we are conducting research within our three focused disease areas-hematologic, neuromuscular and pulmonary-in order to identify new therapeutic candidates to advance into clinical trials. To this end, we expanded our discovery efforts with our proprietary platform technology, IntelliTrap™. We have nominated an IntelliTrap™ molecule, ACE-2494, a systemic muscle agent, as a candidate for clinical development, and we expect to initiate a Phase 1 healthy volunteer study by the end of 2017.Expense

As of ~~September~~June 30, ~~2017,~~2021, our operations have been funded primarily ~~funded~~ by $105.1 million in equity investments from venture investors, ~~$509.7 million~~$1.3 billion from public investors, ~~$123.7~~$164.1 million in equity investments from our collaboration partners and ~~$270.8~~$482.6 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners.

~~We expect to continue to incur significant expenses and increasing operating losses over at least the next several years.~~ We expect our expenses will increase substantially in connection with our ongoing activities, if and as we:

•conduct clinical trials for ~~ACE-083,~~ sotatercept ~~ACE-2494~~in the PH field or any future therapeutic candidates;

•prepare for the potential launch and commercialization of sotatercept in the PH field;

•continue our preclinical studies and potential clinical development efforts of our existing preclinical therapeutic candidates;

•continue research activities for the discovery of new therapeutic candidates;

•manufacture therapeutic candidates for our preclinical studies and clinical ~~trials;~~trials, and potentially for commercialization;

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

•acquire or in-license other therapeutic candidates and patents;

•seek regulatory approval for our therapeutic candidates; and

~~operate as a public company.~~•attract and retain skilled personnel.

~~We will not generate revenue from product sales unless and until we or a partner successfully complete development and obtain regulatory approval for one or more~~

Table of our therapeutic candidates. We expect that this will take a number of years and is subject to significant uncertainty. All current and future development and commercialization costs for luspatercept and, outside of pulmonary hypertension, sotatercept, are paid by Celgene. Contents

If we obtain regulatory approval for ~~ACE-083,~~ sotatercept ~~ACE-2494,~~in the PH field, or any future therapeutic candidate, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such costs are not paid by future partners. We will seek to fund our operations through royalty revenue from the sale of our first and only commercial product, REBLOZYL, and potentially from the sale of equity, debt financings or other sources, including potential additional collaborations. However, we may not generate sufficient royalty revenue and may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to generate significant revenue or raise capital, or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our therapeutic candidates.

~~Our ability~~

Financial Operations Overview

Impact of COVID-19 on our Business

A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization (WHO) in March 2020 and has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. As of June 30, 2021, we have not experienced material financial, development, or supply chain impacts directly related to ~~generate product revenue~~the pandemic, but we may experience disruptions in our ongoing and ~~become profitable depends upon~~planned sotatercept and ACE-1334 clinical trials. We have experienced disruptions in our commercialization efforts for REBLOZYL with regard to customer engagement and in-person promotion. New patient visits for MDS patients in general have also decreased as compared to pre-COVID levels. Although some restrictions on our ~~partners’ ability~~in-person promotion efforts were reduced during the quarter ended June 30, 2021, these restrictions have begun to ~~successfully commercialize products. We expect~~return recently due to ~~incur losses for~~an increase in COVID cases and related hospitalizations attributed to the ~~foreseeable future,~~spread of the delta variant. In addition, as various geographies in the United States and worldwide adapt to surging COVID-19 infections from the delta variant or other new variants, we ~~expect these losses~~may experience additional setbacks to ~~increase as we continue~~ our ~~development of,~~operations, including our clinical trial initiations and ~~seek regulatory approvals for,~~enrollment, that could have a material impact on our ~~therapeutic candidates and potentially begin to commercialize any approved products.~~ business.

For a ~~description~~discussion of the ~~numerous~~ risks ~~and uncertainties associated with product development,~~presented by the COVID-19 pandemic to our results, see ~~“Risk Factors”~~Risk Factors in ~~our~~Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Financial Operations Overview~~2020.

Revenue

Collaboration Revenue

~~We have not generated any revenue from the sale of products.~~ Our revenue to date has been predominantly derived from collaboration revenue, which includes license and milestone ~~revenues~~revenue, cost-sharing revenue, and ~~cost sharing revenue,~~royalties, generated through collaboration and license agreements with partners for the development and commercialization of our therapeutic candidates. ~~Cost sharing~~Cost-sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and ~~potentially,~~ co-promotion activities under our collaboration agreements. ~~Cost sharing~~Cost-sharing revenue is recognized in the period that the related activities are performed. Royalty revenue is recognized in the period that the related sales occur.

Costs and Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs directly incurred by us for the development of our therapeutic candidates, which include:

•direct employee-related expenses, including salaries, benefits, travel and stock-based compensation expense of our research and development personnel;

•expenses incurred under agreements with clinical research organizations, or CROs, and investigative sites that will conduct our clinical trials;

•the cost of acquiring and manufacturing preclinical and clinical study materials, including costs incurred under agreements with contract manufacturing organizations, or CMOs, and developing manufacturing processes;

•allocated facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other supplies;

•expenses associated with obtaining and maintaining patents; and

•costs associated with preclinical activities and regulatory compliance.

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Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our therapeutic candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our therapeutic candidates for which we or any partner obtain regulatory approval. We or our partners may never succeed in achieving regulatory approval for any of our therapeutic ~~candidates.~~candidates beyond the initial approvals of REBLOZYL. The duration, costs and timing of clinical trials and development of ~~our~~ therapeutic candidates will depend on a variety of factors, including:

•the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

•future clinical trial results;

•potential changes in government regulation; and

•the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a therapeutic candidate could mean a significant change in the costs and timing associated with the development of that therapeutic candidate. For example, if the ~~U.S. Food and Drug Administration,~~FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of the clinical development of ~~our~~ therapeutic candidates, or if we experience significant delays in the enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through ~~September~~June 30, ~~2017,~~2021, we have incurred ~~$529.5 million~~$1.1 billion in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue the development of our TGF-beta platform therapeutic candidates, the discovery and development of preclinical therapeutic candidates, and the development of our clinical programs. ~~Expenses~~Research and development expenses associated with ~~luspatercept~~luspatercept-aamt, and, outside of ~~pulmonary hypertension,~~the PH field, sotatercept, are generally reimbursed 100% by ~~Celgene.~~BMS. These reimbursements are recorded as cost-sharing revenue. We are expensing the costs of ~~eight Phase 2~~ clinical trials for ~~luspatercept, dalantercept~~sotatercept and ~~ACE-083, of which the four for luspatercept are reimbursed by Celgene and the two for dalantercept are being discontinued.~~ACE-1334. With respect to the ~~luspatercept Phase 3~~luspatercept-aamt clinical trials directly conducted by ~~Celgene,~~BMS, we do not incur and are not reimbursed for expenses related to these development activities.

We manage certain activities such as clinical trial operations, manufacture of therapeutic candidates, and preclinical animal toxicology studies through third-party ~~CROs.~~CROs and CMOs. The only costs we track by each therapeutic candidate are external costs such as services provided to us by CROs, manufacturing of preclinical and clinical drug product by CMOs, and other outsourced research and development expenses. We do not assign or allocate to individual development programs internal costs such as salaries and benefits, facilities costs, lab supplies, and the costs of preclinical research and ~~studies.~~studies, except for luspatercept-aamt costs for the purposes of billing BMS. Our external research and development expenses during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are as ~~follows:~~follows (certain prior year amounts have been reclassified to conform with current year presentation):

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2017 2016 2017 2016
Luspatercept(1) $ 1,329
$ 1,693
$ 4,783
$ 5,012
Dalantercept(2) 939
1,128
3,688
5,215
ACE-083 2,249
1,820
7,434
3,434
ACE-2494 1,139
—
3,586
—
Total direct research and development expenses 5,656
4,641
19,491
13,661
Other expenses(3) 15,403
12,461
44,896
35,831
Total research and development expenses $ 21,059
$ 17,102
$ 64,387
$ 49,492


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020

Sotatercept (1)	$	17,655	$	8,744	$	38,628	$	17,724
ACE-083 (2)	14		2,338		171		6,524
ACE-1334 (3)	1,746		1,620		2,936		3,380
Total direct research and development expenses	19,415		12,702		41,735		27,628
Other expenses (4)	36,715		25,549		71,694		48,289
Total research and development expenses	$	56,130	$	38,251	$	113,429	$	75,917

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


~~(1)~~	~~Expenses associated with luspatercept are reimbursed 100% by Celgene.~~


~~(2)~~	~~Development of dalantercept is being discontinued.~~

(2)Development of ACE-083 was discontinued. All remaining material expenses were incurred as of the end of 2020.


~~(3)~~	~~Other expenses include unallocated employee and contractor-related expenses, facility expenses, lab supplies, and miscellaneous expenses.~~

(3)These expenses are associated with our development of ACE-1334 in SSc-ILD.

(4)Other expenses include employee and unallocated contractor-related expenses, facility expenses, lab supplies, and miscellaneous expenses, including expenses associated with preclinical and other development programs.

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Selling, General and Administrative Expenses

~~General~~Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our employees in executive, commercial, operational, finance and human resource ~~functions and other~~functions. Selling, general and administrative expenses ~~including~~also include directors’ fees, ~~and~~ professional fees for accounting and legal ~~services.~~

~~We continue to incur expenses related to audit, legal, regulatory and tax-related~~ services, other miscellaneous costs associated with ~~maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance premiums,~~supporting our sales, marketing and investor relations ~~costs associated with being a public company.~~ activities, and allocated facilities, depreciation, and other expenses, such as rent and maintenance of facilities, insurance and other supplies.

We anticipate that our selling, general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our therapeutic candidates. Additionally, if and when we believe regulatory approval of a therapeutic candidate appears likely, to the extent that we are undertaking commercialization of such therapeutic candidate ourselves, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations.

Other Income (Expense) ~~Income,~~, Net

Other income (expense) ~~income,~~, net consists primarily of interest income earned on cash, cash equivalents and investments. Prior to 2021, other income (expense), net also consists of the re-measurement gain or loss associated with the change in the fair value of our common stock warrant ~~liabilities and interest income earned on cash, cash equivalents and investments.~~liabilities.

To estimate the fair value of our liability classified warrants, we use either the Monte Carlo simulation framework, which incorporates future financing events over the remaining life of the warrants to purchase common stock, or for certain re-measurement dates, due to the warrants being deeply in the money, the Black-Scholes option pricing model. We base the estimates in the pricing models, in part, on subjective assumptions, including stock price volatility, risk-free interest rate, dividend yield, and the fair value of the common stock underlying the warrants. The Black-Scholes option pricing model was used at September 30, 2017.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and accrued ~~expenses~~ and ~~stock-based compensation. We also utilize significant estimates and assumptions in determining the fair value of our liability-classified warrants to purchase common stock.~~prepaid clinical expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~There~~During the three and six months ended June 30, 2021, there have been no material changes to our critical accounting policies ~~since~~as reported in our Annual Report on the Form 10-K for the year ended December 31, ~~2016.~~2020. For further information on our critical and other significant accounting policies, see the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

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Results of Operations

Comparison of the Three Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~

Three Months Ended
September 30, Increase
(in thousands) 2017 2016 (Decrease)
Revenue:

Collaboration revenue:

License and milestone $ 135
$ 135
$ —
Cost-sharing, net 2,879
2,870
9
Total revenue 3,014
3,005
9
Costs and expenses:

Research and development 21,059
17,102
3,957
General and administrative 7,533
6,411
1,122
Total costs and expenses 28,592
23,513
5,079
Loss from operations (25,578 ) (20,508 ) (5,070 )
Other income (expense), net 86
(282 ) 368
Loss before income taxes (25,492 ) (20,790 ) (4,702 )
Income tax benefit 41
20
21
Net loss $ (25,451 ) $ (20,770 ) $ (4,681 )

2020


	Three Months Ended June 30,				Increase (Decrease)
(in thousands)	2021		2020		$		%
Revenue:
Collaboration revenue:
Milestone	$	—	$	25,000	$	(25,000)	(100)	%
Cost-sharing, net	2,294		3,678		(1,384)		(38)	%
Royalty	25,646		11,074		14,572		132	%
Total revenue (all amounts are with a related party)	27,940		39,752		(11,812)		(30)	%
Costs and expenses:
Research and development	56,130		38,251		17,879		47	%
Selling, general and administrative	35,472		20,414		15,058		74	%
Total costs and expenses	91,602		58,665		32,937		56	%
Loss from operations	(63,662)		(18,913)		(44,749)		237	%
Other income, net	149		466		(317)		(68)	%
Loss before income taxes	(63,513)		(18,447)		(45,066)		244	%
Income tax provision	(8)		(4)		(4)		100	%
Net loss	$	(63,521)	$	(18,451)	$	(45,070)	244	%

Revenue. We recognized revenue of ~~$3.0~~$27.9 million in the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$3.0~~$39.8 million in the same period in ~~2016.~~2020. All of the revenue in both periods was derived from the ~~Celgene~~BMS agreements. This $11.8 million decrease is primarily related to a decrease of $25.0 million in license and milestone revenue, partially offset by increased royalty revenue from REBLOZYL sales recognized in 2021 of $14.6 million.

Research and Development Expenses. Research and development expenses were ~~$21.1~~$56.1 million in the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$17.1~~$38.3 million in the same period in ~~2016.~~2020. This ~~$4.0~~$17.9 million increase ~~was~~is primarily ~~due~~related to ~~an increase~~growth in ~~personnel expenses totaling $2.8 million,~~order to support ~~development of~~ our ~~wholly owned~~wholly-owned therapeutic candidates and preclinical programs ~~which includes~~ and includes:

•an increase in ~~stock-based compensation~~external clinical trial expense of ~~$1.2 million. Other increases include~~$12.0 million primarily related to increased clinical ~~trial~~activities for the sotatercept clinical trials;

•an increase in personnel and ~~toxicology~~facilities-related expense of $9.5 million related to increased headcount to support our growth; and

•an increase in miscellaneous research expense of $0.8 million; offset by

•a decrease in contract manufacturing, drug supply, and development expenses of ~~$1.4 million.~~$4.1 million related to our ongoing clinical and preclinical programs.

Selling, General and Administrative Expenses. ~~General~~ Selling, general and administrative expenses were ~~$7.5~~$35.5 million in the three months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$6.4 million for the same period in 2016. This $1.1 million increase was primarily due to an increase in personnel expense of $1.0 million.~~

~~Other Income (Expense), Net.~~ Other income, net was $0.1 million in the three months ended September 30, 2017, compared to other expense, net of $0.3 million for the same period in 2016. This $0.4 million change was primarily due to a $0.4 million decrease in the loss associated with marking the common warrant liability to market in each period.

~~Income Tax Benefit.~~ ~~Income tax benefit is attributable to the realization of current year losses that offset unrealized gains, recognized in other comprehensive income, from our investment portfolio.~~

~~Comparison of the Nine Months Ended September 30, 2017 and 2016~~

Nine Months Ended
September 30, Increase
(in thousands) 2017 2016 (Decrease)
Revenue:
Collaboration revenue:
License and milestone $ 406
$ 15,415
$ (15,009 )
Cost-sharing, net 9,370
8,987
383
Total revenue 9,776
24,402
(14,626 )
Costs and expenses:
Research and development 64,387
49,492
14,895
General and administrative 26,735
19,029
7,706
Total costs and expenses 91,122
68,521
22,601
Loss from operations (81,346 ) (44,119 ) (37,227 )
Other income, net 791
6,374
(5,583 )
Loss before income taxes (80,555 ) (37,745 ) (42,810 )
Income tax benefit 29
20
9
Net loss $ (80,526 ) $ (37,725 ) $ (42,801 )

~~Revenue.~~ ~~We recognized revenue of $9.8 million in the nine months ended September 30, 2017, compared to $24.4~~$20.4 million in the same period in ~~2016.~~2020. The $15.1 million increase is primarily due to the following factors:

•an increase in personnel and facilities-related expense of $8.7 million related to increased headcount to support our growth; and

•an increase in consulting and other miscellaneous expenses of $5.9 million primarily related to the preparation for the potential future commercial launch of sotatercept and other activities related to the execution of our global strategy.

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Comparison of the Six Months Ended June 30, 2021 and 2020


	Six Months Ended June 30,				Increase (Decrease)
(in thousands)	2021		2020		$		%
Revenue:
Collaboration revenue:
Milestone	$	—	$	25,000	$	(25,000)	(100)	%
Cost-sharing, net	4,656		6,502		(1,846)		(28)	%
Royalty	48,042		12,594		35,448		281	%
Total revenue (all amounts are with a related party)	52,698		44,096		8,602		20	%
Costs and expenses:
Research and development	113,429		75,917		37,512		49	%
Selling, general and administrative	66,534		38,663		27,871		72	%
Total costs and expenses	179,963		114,580		65,383		57	%
Loss from operations	(127,265)		(70,484)		(56,781)		81	%
Other income, net	286		1,113		(827)		(74)	%
Loss before income taxes	(126,979)		(69,371)		(57,608)		83	%
Income tax provision	(13)		(20)		7		(35)	%
Net loss	$	(126,992)	$	(69,391)	$	(57,601)	83	%

Revenue. We recognized revenue of $52.7 million in the six months ended June 30, 2021, compared to $44.1 million in the same period in 2020. All of the revenue in both periods was derived from the ~~Celgene~~BMS agreements. This ~~$14.6~~$8.6 million ~~decrease was primarily due to the receipt of a $15 million milestone payment from Celgene for the initiation of a Phase 3 clinical trial with luspatercept in 2016, offset in part by an~~ increase ~~in cost sharing revenue of $0.4 million~~is primarily related to ~~an increase~~increased royalty revenue from REBLOZYL sales recognized in ~~reimbursement for personnel compared to the prior year.~~2021 of $35.4 million, partially offset by decreased license and milestone revenue of $25.0 million.

Research and Development Expenses. Research and development expenses were ~~$64.4~~$113.4 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$49.5~~$75.9 million in the same period in ~~2016.~~2020. This ~~$14.9~~$37.5 million increase ~~was~~is primarily ~~due~~related to ~~an increase~~growth in ~~personnel expenses totaling $9.3 million~~order to support ~~development of~~ our ~~wholly owned~~wholly-owned therapeutic candidates and preclinical programs ~~which includes~~ and includes:

•an increase in ~~stock-based compensation~~personnel and facilities-related expense of ~~$4.7 million. Other increases include~~$19.1 million related to increased headcount to support our growth;

•an increase in external clinical trial ~~and toxicology expenses~~expense of ~~$6.0 million. These increases were partially~~$18.8 million related to increased clinical activities for the sotatercept clinical trials; and

•an increase in miscellaneous research expense of $2.1 million; offset by

•a decrease in ~~licensing expense~~contract manufacturing, drug supply, and development expenses of $2.0 million related to ~~payments that we made in connection with the achievement of a milestone in 2016 totaling $0.9 million.~~our ongoing clinical and preclinical programs.

Selling, General and Administrative Expenses. ~~General~~ Selling, general and administrative expenses were ~~$26.7~~$66.5 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$19.0~~$38.7 million ~~for~~in the same period in ~~2016. This $7.7~~2020. The $27.9 million increase ~~was~~is primarily due to the following factors:

•an increase in personnel and facilities-related expense of ~~$7.9~~$15.8 million ~~which includes~~ related to increased headcount to support our growth; and

•an increase in ~~stock-based compensation expense~~consulting and other miscellaneous expenses of ~~$3.8~~$11.9 million primarily ~~due~~related to ~~modifications of a former executive officer’s equity awards, which was announced in May 2017.~~

~~Other Income, Net.~~ ~~Other income, net was $0.8 million in~~ the ~~nine months ended September 30, 2017, compared to $6.4 million~~preparation for the ~~same period in 2016. This $5.6 million decrease was primarily due to a $5.7 million decrease in the gain associated with marking the common warrant liability to market.~~

~~Income Tax Benefit.~~ ~~Income tax benefit is attributable~~potential future commercial launch of sotatercept and other activities related to the ~~realization~~execution of ~~current year losses that offset unrealized gains, recognized in other comprehensive income, from~~ our ~~investment portfolio.~~global strategy.

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Liquidity and Capital Resources

We have incurred losses and cumulative negative cash flows from operations since our inception in June 2003, and as of ~~September~~June 30, ~~2017,~~2021, we had an accumulated deficit of ~~$445.1 million.~~$1.0 billion. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we ~~will~~may need additional capital to fund our operations, which we may raise through a combination of the sale of equity, debt financings or other sources, including potential additional collaborations.

As of ~~September~~June 30, ~~2017,~~2021, our operations have been primarily funded by $105.1 million in equity investments from venture investors, ~~$509.7 million~~$1.3 billion from public investors, ~~$123.7~~$164.1 million in equity investments from our collaboration partners, and ~~$270.8~~$482.6 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners.

As of ~~September~~June 30, ~~2017,~~2021, we had ~~$366.6~~$712.5 million in cash, cash equivalents and investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. We believe that our existing cash, cash equivalents and investments, including the net proceeds from the offering and the exercise of the underwriters' over-allotment, will be sufficient to fund our projected operating requirements into 2021.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands):


	Six Months Ended June 30,
(in thousands)	2021		2020
Net cash (used in) provided by:
Operating activities	$	(152,339)	$	(89,401)
Investing activities	(188,347)		107,426
Financing activities	5,933		27,819
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(334,753)	$	45,844

Nine Months Ended September 30,
(in thousands) 2017 2016
Net cash (used in) provided by:
Operating activities $ (55,928 ) $ (27,955 )
Investing activities 82,117
(113,691 )
Financing activities 191,820
144,879
Net increase in cash and cash equivalents $ 218,009
$ 3,233

Operating Activities

Net cash used in operating activities was ~~$55.9~~$152.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, compared to ~~$28.0~~$89.4 million during the same period in ~~2016. The change was driven primarily by~~ 2020. Significant factors in this $62.9 million increase include:

•an increase in net loss of ~~$42.8~~$57.6 million ~~which includes lower revenue~~primarily due to an increase in operating expenses related to increased headcount and facilities, external expenses for contract manufacturing, prepayment of phase 3 clinical trial activities and the related expense, consulting, and other external expenses to support our wholly-owned therapeutic programs, as well as expenses for commercial activities for REBLOZYL, offset by an increase in royalty revenue associated with sales of REBLOZYL;

•a ~~$15.0~~net increase in operating assets and liabilities of $15.7 million, ~~milestone recognized~~consisting primarily of an increase in ~~2016~~prepaid expenses and other assets of $39.9 million; offset by a ~~$5.7 million~~net decrease in ~~the gain associated with marking the common warrants to market. Operating expenses increased by $22.6~~collaboration receivables and accounts payable of $29.4 million ~~for 2017, including an $8.5~~and $9.8 million, respectively; and

•a net increase in other non-cash expenses of $10.3 million, largely related to an increase in stock-based compensation expense of 15.3 million, and offset by a net decrease in ~~part due to modifications~~amortization and accretion of ~~the equity awards~~premiums and discounts on available-for-sale securities of ~~our former Chief Operating Officer.~~3.4 million.

Investing Activities

Net cash ~~provided by investing activities was $82.1 million for the nine months ended September 30, 2017 compared to net cash~~ used in investing activities ~~of $113.7~~was $188.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. This increase in~~2021, compared to net cash provided by investing activities ~~was primarily due to net maturities~~ of ~~our investments of $85.8~~$107.4 million during the ~~nine~~same period in 2020. Net cash used and provided by investing activities primarily consisted of the following amounts relating to activity within our investment portfolio:

•for the six months ended ~~September~~June 30, ~~2017~~2021, purchases of investments of $186.5 million net of maturities due to the execution of our investment strategy in accordance with our policy as we invest the money raised in our July 2020 public offering in marketable securities; and

•for the six months ended June 30, 2020, net proceeds from sales and maturities of investments of $109.8 million in connection with managing ~~the~~our investment portfolio to meet our projected cash ~~requirements, compared to net purchases~~requirements.

Table of ~~$111.4 million in the nine months ended September 30, 2016, in connection with implementing our investment policy.~~Contents

Financing Activities

Net cash provided by financing activities was ~~$191.8~~$5.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021, compared to ~~$144.9~~$27.8 million ~~for~~during the same period in ~~2016. The increase is~~2020. Net cash provided by financing activities consisted primarily ~~attributable~~of the following:

•for the six months ended June 30, 2021, $5.9 million in cash proceeds from the exercise of stock options and the issuance of common stock related to ~~$187.6~~the employee stock purchase plan; and

•for the six months ended June 30, 2020, $27.8 million in cash proceeds from the exercise of ~~proceeds received from our public offering in September 2017, compared~~stock options and the issuance of common stock related to ~~$140.3 million of proceeds received during~~ the ~~comparable period in 2016 from our public offering.~~employee stock purchase plan.

Operating Capital Requirements

To date, we have ~~not~~only generated ~~any~~limited revenue from royalties on the sale of our first and only commercial product, ~~sales. We do not know when, or if, we will generate any revenue from product sales. We will not generate revenue from product sales unless and until we or~~REBLOZYL, since receiving our ~~partners obtain~~first regulatory approval offrom the FDA in November 2019. We expect our expenses to increase and ~~commercialize one of our current or future therapeutic candidates. We anticipate that we will continue~~ to ~~generate~~incur losses ~~for the foreseeable future, and we expect the losses to increase~~ as we continue the development of, and seek ~~and obtain~~ regulatory approvals for, ~~ACE-083,~~ sotatercept ~~ACE-2494~~in the PH field and any future therapeutic candidates, and as we begin to commercialize any approved products. We are subject to all of the risks inherent in the development of therapeutic candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. ~~We have incurred,~~

Based on our current operating plan and ~~expect to continue to incur, additional costs associated with operating as a public company. We anticipate that~~projections, we ~~will need additional funding in connection with our continuing operations.~~

We believe that our ~~existing~~current cash, cash equivalents and investments, ~~including~~along with the ~~net proceeds~~expected royalty revenue from ~~the offering and the exercise of the underwriters' over-allotment option,~~REBLOZYL sales, will be sufficient to fund our projected operating requirements ~~into 2021. However, we will require additional capital~~ for the ~~further development of our existing therapeutic candidates and may also need to raise additional funds sooner to pursue other development activities related to additional therapeutic candidates.~~foreseeable future.

Until we can generate a sufficient amount of revenue from our products, if ever, we expect to fund our operations through a combination of equity offerings, debt financings or other sources, including potential additional collaborations. Additional

capital may not be available on favorable terms, if at all. If we are unable to generate sufficient revenue or raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our therapeutic candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We may not be able to enter into new collaboration arrangements for any of our proprietary therapeutic candidates. Any of these events could significantly harm our business, financial condition and prospects.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

•the achievement of milestones under our ~~agreement~~agreements with ~~Celgene;~~BMS;

•the amount of royalties we receive on sales of REBLOZYL;

•the terms and timing of any other collaborative, licensing and other arrangements that we may establish;

•the initiation, progress, timing and completion of preclinical studies and clinical trials for our therapeutic candidates and potential therapeutic candidates;

•the number and characteristics of therapeutic candidates that we pursue;

•the progress, costs and results of our clinical trials;

•the outcome, timing and cost of regulatory approvals;

•delays that may be caused by changing regulatory requirements;

•the cost and timing of hiring new employees to support our continued ~~growth;~~growth, including potential new facilities;

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•the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;

•the costs and timing of procuring clinical and commercial supplies of our therapeutic candidates;

•the costs of preparing for the potential launch and commercialization of sotatercept or our other therapeutic candidates;

•the extent to which we acquire or invest in businesses, products or technologies; and

•the costs involved in defending and prosecuting litigation regarding in-licensed or wholly-owned intellectual property.

Net Operating Loss (NOL) Carryforwards

We had net deferred tax assets of approximately ~~$136.5~~$282.2 million as of December 31, ~~2016,~~2020, which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily composed of federal and state tax net operating loss, or NOL, carryforwards, research and development tax credit carryforwards, and deferred revenue, accruals and other temporary differences. As of December 31, ~~2016,~~2020, we had federal NOL carryforwards of approximately ~~$339.3~~$871.4 million and state NOL carryforwards of ~~$293.7~~$788.3 million available to reduce future taxable income, if any. ~~These~~Of these federal and state NOL carryforwards, $438.0 million and $787.7 million, respectively, will expire at various times through ~~2036.~~2040. The federal NOL of $433.4 million and state NOL of $0.6 million generated beginning in 2018 can be carried forward indefinitely. In general, if we experience a greater than ~~50 percent~~50% aggregate change in ownership of certain significant stockholders over a three-year period, or a Section 382 ownership change, utilization of our pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state laws. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial. If we experience a Section 382 ownership change in connection with our public offerings or as a result of future changes in our stock ownership, some of which changes are outside our control, the tax benefits related to the NOL carryforwards may be limited or lost. For additional information about our taxes, see Note 13 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

Contractual Obligations and Commitments

During the three months ended ~~September~~June 30, ~~2017,~~2021, 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” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016 except as described in Note 13 of the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on the Form 10-Q.~~2020.

Recent Accounting Pronouncements

For ~~information on recent~~a summary of recently issued accounting pronouncements ~~see Recently Issued and Adopted~~applicable to the Company refer to Note 2, "Summary of Significant Accounting ~~Standards~~Policies" in the ~~notes~~Notes to ~~the condensed consolidated financial statements appearing elsewhere~~our audited Consolidated Financial Statements included in ~~this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K for the year ended December 31, 2020.

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 in the rules and regulations of the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

We are exposed to market risk related to changes in interest rates. As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, we had cash, cash equivalents and investments of ~~$366.6~~$712.5 million and ~~$234.4~~$857.5 million, respectively. Our cash equivalents are invested primarily in bank deposits and money market mutual funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. Due to the duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate 100 basis point change in interest rates would have a material ~~effect~~impact on the fair market value of our portfolio. We have the ability to hold our investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

We contract with CROs and manufacturers internationally. Transactions with these providers are predominantly settled in U.S. dollars and, therefore, we believe that we have only minimal exposure to foreign currency exchange risks. We do not hedge against foreign currency risks.

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Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, or the Exchange Act, is (1) recorded, processed, summarized, and reported within the time periods specified in the ~~SEC’s~~Securities and Exchange Commission's rules and forms, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of ~~September~~June 30, ~~2017,~~2021, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2017,~~2021, the design and operation of our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended ~~September~~June 30, ~~2017,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

While we are not currently a party to any material legal proceedings, we could become subject to legal proceedings in the ordinary course of business. We do not expect any such potential items to have a significant impact on our financial position.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Item 6. Exhibits

~~The exhibits filed as part~~


Exhibit Number						Description of Exhibit
10.1+						Collaboration, License and Option Agreement between Acceleron Pharma Inc. and Celgene Corporation, dated as of August 2, 2011

31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*						Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

+ Portions of this ~~Quarterly Report on Form 10-Q are set forth on~~exhibit (indicated by asterisks) have been omitted in accordance with the ~~Exhibit Index, which is~~rules of the Securities and Exchange Commission.

* This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated ~~herein~~ by ~~reference.~~reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.

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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.



	ACCELERON PHARMA INC.

Date: ~~November 7, 2017~~August 5, 2021	By:	/s/ HABIB J. DABLE
		Habib J. Dable
		Chief Executive Officer ~~President~~ and ~~Director~~President

Date: ~~November 7, 2017~~August 5, 2021	By:	/s/ KEVIN F. MCLAUGHLIN
		Kevin F. McLaughlin
		Senior Vice President, Chief Financial Officer and Treasurer

~~EXHIBIT INDEX~~



~~Exhibit Number~~		~~Description of Exhibit~~
~~10.1~~		First Amendment to Lease, dated as of July 18, 2017, between MIT 128 Sidney Leasehold LLC and Acceleron Pharma Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (001-36065), filed on July 19, 2017)

~~10.2+~~		~~Amended and Restated Collaboration, License and Option Agreement between Acceleron Pharma Inc. and Celgene Corporation, dated as of September 18, 2017~~

~~31.1~~		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~		~~Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

Confidential treatment has been granted by, or is being requested from, the Securities and Exchange Commission as to certain portions of this Exhibit, which portions have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as applicable.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Collaboration revenue:
License and milestone	$	135		$	135		$	406		$	15,415
Cost-sharing, net	2,879			2,870			9,370			8,987
Total revenue (all amounts are with related party)	3,014			3,005			9,776			24,402
Costs and expenses:
Research and development	21,059			17,102			64,387			49,492
General and administrative	7,533			6,411			26,735			19,029
Total costs and expenses	28,592			23,513			91,122			68,521
Loss from operations	(25,578		)	(20,508		)	(81,346		)	(44,119		)
Other (expense) income, net	(410		)	(794		)	(683		)	5,026
Interest income	496			512			1,474			1,348
Total other income (expense) net	86			(282		)	791			6,374
Loss before income taxes	(25,492		)	(20,790		)	(80,555		)	(37,745		)
Income tax benefit	41			20			29			20
Net loss applicable to common stockholders	$	(25,451	)	$	(20,770	)	$	(80,526	)	$	(37,725	)

Net loss per share applicable to common stockholders-basic and diluted (Note 9)	$	(0.65	)	$	(0.55	)	$	(2.08	)	$	(1.01	)

Weighted-average number of common shares used in computing net loss per share applicable to common stockholders:	39,361			37,616			38,804			37,268

Other comprehensive loss:
Net loss	$	(25,451	)	$	(20,770	)	$	(80,526	)	$	(37,725	)
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax of $59 thousand, $59 thousand, $53 thousand and $53 thousand for the three and nine months ended September 30, 2017 and 2016, respectively	100			(374		)	170			98
Comprehensive loss	$	(25,351	)	$	(21,144	)	$	(80,356	)	$	(37,627	)



	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Outstanding stock options	3,459	3,193	3,459	3,193
Common stock warrants	64	397	64	397
Shares issuable under employee stock purchase plan	19	18	19	18
Outstanding restricted stock units	551	670	551	670
	4,093	4,278	4,093	4,278



	Number of Stock Options		Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life (in years)	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2016	3,316		$	25.96	7.03
Granted	669		$	30.51
Exercised	(442	)	$	7.32
Canceled or forfeited	(84	)	$	34.16
Outstanding at September 30, 2017	3,459		$	29.02	6.99	$	32,169
Exercisable at September 30, 2017	1,907		$	25.88	5.55	$	24,324



	Number of RSUs		Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2016	732		$	31.55
Granted	129		$	29.53
Vested	(289	)	$	31.00
Forfeited	(21	)	$	32.27
Unvested balance at September 30, 2017	551		$	31.34



	Three Months Ended September 30,						Increase
(in thousands)	2017			2016			(Decrease)
Revenue:
Collaboration revenue:
License and milestone	$	135		$	135		$	—
Cost-sharing, net	2,879			2,870			9
Total revenue	3,014			3,005			9
Costs and expenses:
Research and development	21,059			17,102			3,957
General and administrative	7,533			6,411			1,122
Total costs and expenses	28,592			23,513			5,079
Loss from operations	(25,578		)	(20,508		)	(5,070		)
Other income (expense), net	86			(282		)	368
Loss before income taxes	(25,492		)	(20,790		)	(4,702		)
Income tax benefit	41			20			21
Net loss	$	(25,451	)	$	(20,770	)	$	(4,681	)