Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review "Item 1A, Risk Factors" of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company committed to transforming patients’ lives through scientific leadership in the field of cellular metabolism and adjacent areas of biology, with the goal of creating differentiated, small molecule medicines in the areas of genetically defined diseases, or GDDs, and, until the completion of the sale of our oncology business to Servier as described below, hematologic malignancies and solid tumors. To address our focus areas, we take a systems biology approach to deeply understand disease states, drive the discovery and validation of novel therapeutic targets, and define patient selection strategies, thereby increasing the probability that our experimental medicines will have the desired therapeutic effect.

Proposed Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)

On December 20, 2020, we entered into a Purchase and Sale Agreement, or the Purchase Agreement, with Servier. The Purchase Agreement provides for the sale of our commercial, clinical and research-stage oncology portfolio assets and pipeline, or oncology business, for a payment of $1.8 billion in cash at the closing, subject to certain adjustments for working capital of the oncology business at the closing and amounts for a representation and warranty insurance policy, and a payment of $200 million in cash, if, prior to January 1, 2027, vorasidenib is granted new drug application, or NDA, approval from the U.S. Food and Drug Administration, or FDA, with an approved label that permits vorasidenib’s use as a single agent for the adjuvant treatment of patients with Grade 2 glioma that have an isocitrate dehydrogenase 1 or 2, or IDH1 or IDH2, mutation (and, to the extent required by such approval, the vorasidenib companion diagnostic test is granted an FDA premarket approval), as well as a royalty of 5% of U.S. net sales of TIBSOVO® from the close of the transaction through loss of exclusivity of TIBSOVO® and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity of vorasidenib.

The transaction includes the proposed sale of our oncology business, including TIBSOVO®, our clinical-stage product candidates vorasidenib, AG-270 and AG-636, and our oncology research programs. Servier will also acquire our co-commercialization rights for Bristol Myers Squibb’s IDHIFA®, the $25.0 million potential milestone payment, and conduct certain clinical development activities within the IDHIFA® development program.

The parties’ obligations to consummate the proposed sale are subject to customary conditions, including the approval of the sale by the holders of at least a majority of our outstanding shares of common stock, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of required regulatory approvals in Germany.

If the transaction closes, we will be a smaller, less diversified company with a more limited business concentrated on GDDs. As a result, we may be more susceptible to changing market conditions, including fluctuations and risks particular to the markets for patients with GDDs, than a more diversified company, which could adversely affect our business, financial condition and results of operations. In addition, the diversification of our revenues, costs and cash flows will diminish following the transaction, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and our ability to fund capital expenditures and investments or satisfy other financial commitments may be diminished.

For more information on our proposed sale to Servier refer to "Proposed Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)" within Item 1, Business.

Our wholly-owned product, TIBSOVO® (ivosidenib) is an oral targeted inhibitor of the mutated isocitrate dehydrogenase 1, or IDH1 enzyme. TIBSOVO® is the first and only U.S. Food and Drug Administration, or FDA-approved therapy for the treatment of adult patients with (i) relapsed or refractory acute myeloid leukemia, or R/R AML, with a susceptible IDH1 mutation as detected by an FDA-approved test (approved by the FDA in July 2018) and (ii) newly diagnosed AML with a susceptible IDH1 mutation as detected by an FDA-approved test who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy (approved by the FDA in May 2019). In December 2018, we submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, for TIBSOVO® for the treatment of adult patients with R/R AML with an IDH1 mutation. In October 2020, we announced the withdrawal of the MAA based on feedback from the EMA's Committee for Medicinal Products for Human Use (CHMP) that the available clinical data from our

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single arm, uncontrolled Phase 1 trial did not sufficiently support a positive benefit-risk balance for the proposed indication. In addition, we are currently evaluating ivosidenib in the clinical trials described below.

Our other marketed product is IDHIFA® (enasidenib), an oral targeted inhibitor of the mutated isocitrate dehydrogenase 2, or IDH2 enzyme and the first and only FDA-approved therapy for patients with R/R AML and an IDH2 mutation. In August 2017, the FDA granted our collaboration partner Celgene approval of IDHIFA® for the treatment of adult patients with R/R AML and an IDH2, mutation as detected by an FDA-approved test. We were eligible to receive royalties at tiered low-double digit to mid-teen percentage rates on any net sales of IDHIFA® and have exercised our rights to provide up to one-third of the field-based commercialization efforts in the United States. In June 2018, Celgene submitted an MAA to the EMA for IDHIFA® for IDH2 mutant-positive AML which it subsequently withdrew in December 2019. On June 11, 2020 we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from Bristol Myers Squibb, or BMS, to Royalty Pharma, or RPI, for $255.0 million. In addition, we and Celgene are currently evaluating enasidenib in the clinical trials described below.

Our pre-commercial clinical cancer product candidates are vorasidenib and AG-270.

We are developing vorasidenib for the treatment of IDH mutant-positive low grade glioma. Vorasidenib is an orally available, selective brain-penetrant pan-IDH mutant inhibitor. We are currently evaluating vorasidenib in the clinical trials described below.

We are developing AG-270 for the treatment of cancers carrying a methylthioadenosine phosphorylase, or MTAP, deletion, which is present in approximately 15 percent of all cancers. AG-270 is an orally available selective potent inhibitor of methionine adenosyltransferase 2a, or MAT2A. On March 25, 2020, Celgene declined to exercise its right to opt into co-development and co-commercialization for AG-270, our MAT2A inhibitor development program, under our 2016 global research and collaboration agreement with Celgene, or the 2016 Agreement. We are currently evaluating AG-270 in a phase 1 dose-escalation and expansion trial in multiple tumor types carrying a MTAP, deletion, described below.

In the first quarter of 2020, we made the decision to cease the internal development of AG-636 for the treatment of hematologic malignancies, including lymphoma due to limited enrollment in our phase 1 trial in lymphoma. AG-636 is an inhibitor of the metabolic enzyme dihydroorotate dehydrogenase, or DHODH, licensed by us from Aurigene Discovery Technologies Limited, or Aurigene.

The lead product candidate in our genetically defined disease, or GDD, portfolio, mitapivat, is an activator of both wild-type and mutant pyruvate kinase-R, or PKR, for the potential treatment of hemolytic anemias. We are currently evaluating mitapivat for the treatment of pyruvate kinase, or PK, deficiency, thalassemia and sickle cell disease, or SCD, in the clinical trials described below. We are also developing AG-946, a next-generation PKR activator, for the potential treatment of hemolytic anemias and other indications.

In addition to the aforementioned development programs, we are seeking to advance a number of early-stage discovery programs in our focus areas of GDDs, malignant hematology and solid tumors based on our scientific leadership in the field of cellular metabolism and adjacent areas of biology.

Collaboration and License Agreements

In November 2019, the acquisition of Celgene was completed by BMS, and Celgene became a wholly-owned subsidiary. We will continue to refer to our collaboration agreements with Celgene throughout this Form 10-K as being with Celgene Corporation.

Celgene Corporation

Celgene is a related party through ownership of our common stock. In April 2010, we entered into a discovery and development collaboration and license agreement focused on cancer metabolism, or the 2010 Agreement. The 2010 Agreement was amended in October 2011 and July 2014. On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million. Under the 2010 Agreement, we remain eligible to receive a $25.0 million potential milestone payment for the enasidenib program upon achievement of a specified ex-U.S. commercial milestone event, as well as reimbursement for costs incurred for our co-commercialization efforts and development activities.

In April 2015, we entered into a joint worldwide development and profit share collaboration and license agreement with Celgene, and our wholly owned subsidiary, Agios International Sarl, entered into a collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the

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development and commercialization of vorasidenib products. The AG-881 Agreements were terminated effective September 4, 2018.

In May 2016, we entered into a master research and collaboration agreement with Celgene, or the 2016 Agreement. The initial four-year research term for the 2016 Agreement expired on May 17, 2020. On March 25, 2020 Celgene declined the option to extend the research agreement. Further, on April 10, 2020 Celgene notified us that they will be declining to elect any program as a continuation program under the 2016 agreement. Celgene had designated AG-270, our inhibitor MAT2A, as a development candidate under the 2016 Agreement. On March 25, 2020, Celgene notified us of their decision to decline their option to enter into a Development & Commercialization Agreement with respect to the MAT2A program under the 2016 Agreement.

Refer to Note 13. Collaboration and License Agreements, to the consolidated financial statements in this Annual Report on Form 10-K for additional discussion of the Collaboration Agreements.

CStone Agreement

In June 2018, we entered into an exclusive license agreement with CStone Pharmaceuticals, or the CStone Agreement, for the development and commercialization of certain products containing ivosidenib in mainland China, Hong Kong, Macau, and Taiwan for therapeutic uses in humans, excluding brain cancer, unless added by us in our sole discretion. On March 2, 2020, we amended the CStone Agreement to include Singapore as part of the CStone Territory. We retain development and commercialization rights for the rest of the world. Refer to Note 13. Collaboration and License Agreements, to the consolidated financial statements in this Annual Report on Form 10-K for additional discussion of the CStone Agreement.

Financial Operations Overview

Impact of COVID-19 on our Business

The spread of SARS-CoV-2 and the resulting disease COVID-19 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. In March 2020, the World Health Organization declared COVID-19 a pandemic. As of December 31, 2020, we have not experienced a significant financial or supply chain impact directly related to the pandemic but have experienced some disruptions to clinical operations, including timelines to complete patient enrollment in some of our clinical trials and delays in submission of regulatory filings, as further described below. In this time of uncertainty as a result of the COVID-19 pandemic, we are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers. In March 2020, we established and implemented a work from home policy for our employees. In April 2020, we made internal resource allocation decisions in order to deliver on key business objectives and to increase our financial flexibility, including, pausing the development of certain preclinical research programs, delaying the start of certain longer-term clinical studies, limiting staff hiring, reducing the number of contract workers, and delaying or limiting information technology and facilities infrastructure projects. In June 2020, we implemented Phase 1 of our return to work program, which enabled all of our lab-based employees and related support personnel to return to our Cambridge office, and in September 2020 we began implementing Phase 2 of our return to work program by opening our Cambridge office to an additional, limited number of employees who prefer to work onsite. Our field-based employees engage with healthcare providers and other third parties remotely and, where local regulations allow, on a limited in-person basis. We are conducting our return to work program under strict guidelines as required by federal, state, and local authorities. We have been monitoring our supply chain network for disruptions due to the COVID-19 pandemic, and our third-party manufacturers remain largely unaffected, with any campaign delays experienced to date being limited to a few days in duration. Although global shipping continues to be disrupted due to the pandemic, we have not experienced a supply impact and have accrued additional safety stock of TIBSOVO® in order to further mitigate risk.

As the pandemic continues to unfold, the extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include changes in the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Any prolonged material disruption of our employees, suppliers, manufacturing, or customers could negatively impact our consolidated financial position, consolidated results of operations and consolidated cash flows. As a result, we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities.

General

Since inception, our operations have primarily focused on organizing and staffing our company, business planning, raising capital, assembling our core capabilities in cellular metabolism, identifying potential product candidates, undertaking preclinical studies, conducting clinical trials, establishing a commercial infrastructure and marketing our approved products. To date, we have financed our operations primarily through commercial sales of TIBSOVO®, funding received from our various

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collaboration agreements discussed above, private placements of our preferred stock, our initial public offering of our common stock and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings.

Additionally, since inception, we have incurred significant operating losses. Our net losses were $327.4 million, $411.5 million and $346.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $1,843.5 million. We expect to continue to incur significant expenses and net losses until such time we are able to report profitable results. Our net losses may fluctuate significantly from year to year. We expect that we will continue to incur significant expenses as we continue to advance and expand clinical development activities for our lead programs: ivosidenib, vorasidenib, mitapivat, AG-270, and AG-946; continue to discover and validate novel targets and drug product candidates; expand and protect our intellectual property portfolio; and hire additional commercial, development and scientific personnel.

Revenue

Our wholly owned product, TIBSOVO®, received approval from the FDA on July 20, 2018 for the treatment of adult patients with R/R AML with susceptible IDH1 mutation. Upon FDA approval of TIBSOVO® in the U.S., we began generating product revenue from sales of TIBSOVO®. We sell TIBSOVO® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. These Customers subsequently resell TIBSOVO® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of TIBSOVO®. For further discussion of our revenue recognition policy, see Note 3, Summary of Significant Accounting Polices and Note 12, Product Revenue, to the consolidated financial statements in this Annual Report on Form 10-K.

We also recognize collaboration revenue from our agreements with Celgene and CStone, and royalty revenue from Celgene on sales of IDHIFA®. On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from Celgene, a wholly-owned subsidiary of BMS, to RPI for $255.0 million. Due to our continued involvement in the generation of these royalties through our co-promote right, we are treating the sale of these royalties as a liability and will continue to recognize royalty revenue on sales of IDHIFA®.

In the future, we expect to continue to generate revenue from a combination of product sales, royalties on product sales, cost reimbursements, milestone payments, and upfront payments to the extent we enter into future collaborations or licensing agreements.

Cost of Sales

Cost of sales consists primarily of manufacturing costs for sales of TIBSOVO®. Based on our policy to expense costs associated with the manufacturing of our products prior to regulatory approval, certain of the manufacturing costs associated with product shipments of TIBSOVO® recorded during the years ended December 31, 2020, 2019 and 2018, respectively, were expensed prior to July 20, 2018 and, therefore, are not included in costs of sales during the years ended December 31, 2020, 2019 or 2018, respectively.

Research and development expenses

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress. However, the successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development and to commercialize these product candidates. We are also unable to positively predict when future net cash inflows will commence from TIBSOVO®, vorasidenib, mitapivat, AG-270, AG-946 or any of our other product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainty of:

•establishing an appropriate safety profile with an investigational new drug application, or IND, and/or NDA enabling toxicology and clinical trials;

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

•the receipt of marketing approvals from applicable regulatory authorities;

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

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

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

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•maintaining an acceptable safety profile of the products following approval.

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

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

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

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

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

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

The following summarizes our most advanced programs:

Ivosidenib (mutant IDH1 inhibitor)

Ivosidenib is an orally available, selective, potent inhibitor of the mutated IDH1 protein, making it a highly targeted therapy for the treatment of patients with cancers that harbor IDH1 mutations. We hold worldwide development and commercial rights to ivosidenib and have licensed certain development and commercialization rights to ivosidenib in mainland China, Hong Kong, Macau, Singapore, and Taiwan to CStone, pursuant to an exclusive license agreement with CStone, or the CStone Agreement, discussed more fully above. We are required to fund the future development and commercialization costs related to this program with the exception of development and commercialization activities of CStone under the CStone Agreement. Mutations in IDH1 have been identified in difficult to treat hematologic and solid tumor cancers, including AML, myelodysplastic syndromes, or MDS, cholangiocarcinoma and low grade glioma, where both the treatment options and prognosis for patients are poor.

The FDA has approved TIBSOVO® for the treatment of adult patients with R/R AML and a susceptible IDH1 mutation and for the treatment of patients with newly diagnosed AML with a susceptible IDH1 mutation as detected by an FDA-approved test who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy. In December 2018, we submitted a MAA to the EMA for TIBSOVO® for the treatment of adult patients with IDH1 mutant-positive R/R AML. In October 2020, we withdrew the MAA based on feedback from the EMA's CHMP that the available clinical data from our single arm, uncontrolled Phase 1 trial did not sufficiently support a positive benefit-risk balance for the proposed indication. The FDA granted orphan drug designation for ivosidenib for the treatment of cholangiocarcinoma, granted Breakthrough Therapy designation for ivosidenib in combination with azacitidine for the treatment of newly diagnosed AML with an IDH1 mutation in adult patients who are at least 75 years old or who have comorbidities that preclude use of intensive induction chemotherapy, and granted Breakthrough Therapy designation for ivosidenib for the treatment of adult patients with relapsed or refractory MDS with a susceptible IDH1 mutation as detected by an FDA-approved test.

We are evaluating ivosidenib in the following clinical trials:

Hematologic Malignancies

•A phase 1b, multicenter, international, open-label clinical trial, to evaluate safety and clinical activity of ivosidenib or enasidenib in combination with induction and consolidation therapy in patients with newly diagnosed AML with an IDH1 or IDH2 mutation who are eligible for intensive chemotherapy. This trial has completed enrollment.

•A phase 1/2 frontline combination clinical trial, conducted by Celgene, of either ivosidenib or enasidenib in combination with VIDAZA® (azacitidine) in newly diagnosed AML patients not eligible for intensive chemotherapy. The trial has completed enrollment.

•AGILE, a global, registration-enabling phase 3 clinical trial, combining ivosidenib and VIDAZA® (azacitidine) in newly diagnosed AML patients with an IDH1 mutation who are ineligible for intensive chemotherapy. The trial is enrolling patients. Although we experienced disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

•HO150/AMLSG29, an intergroup sponsored, global, registration-enabling phase 3 trial, supported in collaboration with Celgene, combining ivosidenib or enasidenib with standard induction and consolidation chemotherapy in frontline AML patients with an IDH1 or IDH2 mutation. The trial is currently enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

•A phase 1 multicenter, open-label, dose-escalation and expansion clinical trial, designed to assess its safety, clinical activity and tolerability as a single agent in patients with advanced hematologic malignancies with an IDH1 mutation.

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The trial reopened enrollment of its relapsed or refractory MDS arm and although we experienced disruptions related to the COVID-19 pandemic, we expect to complete enrollment in 2021.

Solid Tumors

•ClarIDHy, a registration-enabling phase 3, multicenter, randomized, double-blind, placebo-controlled clinical trial of ivosidenib in previously-treated patients with nonresectable or metastatic cholangiocarcinoma with an IDH1 mutation. The trial has completed enrollment. The primary endpoint of the trial of progression-free survival was met and, although we experienced disruptions related to the COVID-19 pandemic, we expect to file an sNDA with the FDA for TIBSOVO® in cholangiocarcinoma in the first quarter of 2021.

•A phase 1 multi-center, open-label clinical trial of ivosidenib in patients with advanced IDH1 mutant-positive solid tumors, including glioma. The trial has completed enrollment.

•A perioperative study with ivosidenib and vorasidenib in low grade glioma to further investigate their effects on brain tumor tissue. The trial has completed enrollment.

Enasidenib (mutant IDH2 inhibitor)

Enasidenib is an orally available, selective, potent inhibitor of the mutated IDH2 protein, making it a highly targeted therapeutic candidate for the treatment of patients with cancers that harbor IDH2 mutations, including those with AML, who have a historically poor prognosis. The FDA has granted Celgene approval of IDHIFA® for the treatment of adult patients with R/R AML and an IDH2 mutation.

In addition to the clinical trials discussed above, enasidenib is also being evaluated by Celgene in IDHENTIFY, an international phase 3, multi-center, open-label, randomized clinical trial designed to compare the efficacy and safety of enasidenib versus conventional care regimens in patients 60 years or older with IDH2 mutant-positive AML that is refractory to or relapsed after second- or third-line therapy. This trial has completed enrollment. In August 2020, BMS announced that the trial did not meet the primary endpoint of overall survival in patients with IDH2 mutant positive AML.

Vorasidenib: brain penetrant pan-IDH program

Vorasidenib is an orally available, selective, brain-penetrant, pan-IDH mutant inhibitor. Celgene is eligible to receive royalties from us at a low single-digit percentage rate on worldwide net sales of products containing vorasidenib.

We are evaluating vorasidenib in the following clinical trials:

•A phase 1 multi-center, open-label clinical trial of vorasidenib in patients with advanced IDH1 or IDH2 mutant-positive solid tumors, including glioma. The trial has completed enrollment.

•The above mentioned perioperative study with ivosidenib and vorasidenib in low grade glioma to further investigate their effects on brain tumor tissue. The trial has completed enrollment.

•INDIGO, a registration-enabling phase 3 clinical trial of vorasidenib in low-grade (grade 2) glioma with an IDH1 or IDH 2 mutation. The trial is enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

Mitapivat: PKR activator

We are developing mitapivat for the treatment of PK deficiency and other hemolytic anemias such as thalassemia and SCD. Mitapivat is an orally available small molecule and a potent activator of the wild-type and mutated PKR enzymes. To date, we have demonstrated in clinical trials that treatment with mitapivat can lead to durable sustained increases in hemoglobin in patients with amenable mutations in the PKR gene and a statistically significant and clinically meaningful reduction in transfusion burden in regularly-transfused patients with PK deficiency, and we have observed early signs of improvements in hemoglobin in thalassemia patients who have wild-type PKR.

We have worldwide development and commercial rights to mitapivat and expect to fund the future development and commercialization costs related to this program. Mitapivat has been granted orphan drug designation for the treatment of PK deficiency by the FDA and the EMA. Additionally, mitapivat has received orphan drug designation from the FDA for the treatment of thalassemia and sickle cell disease.

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We are evaluating mitapivat in the following clinical trials:

•DRIVE PK, a global phase 2, first-in-patient, open-label safety and efficacy clinical trial of mitapivat in adult, transfusion-independent patients with PK deficiency. This trial has completed enrollment.

•ACTIVATE-T, a single arm, global, pivotal trial of mitapivat in regularly-transfused patients with PK deficiency. The trial has completed enrollment. Although we experienced disruptions related to the COVID-19 pandemic, we reported in January 2021 that this trial met its primary endpoint of a statistically significant and clinically meaningful reduction in transfusion burden.

•ACTIVATE, a 1:1 randomized, placebo-controlled, global, pivotal trial of mitapivat in patients with PK deficiency who do not receive regular transfusions. The trial has completed enrollment. Although we experienced disruptions related to the COVID-19 pandemic, we reported in December 2020 that this trial met its primary endpoint of a statistically significant, sustained increase in hemoglobin compared to placebo. In addition, data from the trial demonstrated that treatment with mitapivat showed statistically significant improvement in key pre-specified secondary endpoints regarding patient reported outcomes.

•A phase 2, open-label safety and efficacy clinical trial of mitapivat in adult patients with non-transfusion-dependent α- and β-thalassemia. The trial has completed enrollment.

•In collaboration with the National Institutes of Health, or NIH, we are evaluating mitapivat in a phase 1 trial in patients with sickle cell disease pursuant to a cooperative research and development agreement. The trial is ongoing and enrolling patients, although the NIH experienced disruptions related to the COVID-19 pandemic.

We plan to submit an NDA for mitapivat in adults with PK deficiency to the FDA in the second quarter of 2021, and plan to submit an MAA for mitapivat in adults with PK deficiency to the EMA in mid-2021, with a potential 2022 commercial launch in both geographies. We will continue to grow our US commercial infrastructure and evaluate all options for the commercialization and continued development of mitapivat outside of the United States in order to maximize the benefit to patients and value to our shareholders, including through exploring potential partnership opportunities.

AG-270: Targeting MAT2A for the treatment of MTAP-deleted cancers

AG-270, an orally available selective potent inhibitor of MAT2A, is our development candidate focused on MTAP-deleted cancers. MTAP is a metabolic gene that is deleted in approximately 15 percent of all cancers. We have shown in preclinical studies that MTAP deletion predicts sensitivity to inhibition of a subset of enzymes involved in the synthesis or utilization of the methyl donor S-adenosylmethionine, or SAM. Among this subset of enzymes, we have targeted MAT2A, the enzyme responsible for the synthesis of SAM in tumor cells. On April 10, 2020 Celgene notified us that they declined to elect any program as a continuation program under the 2016 agreement. With this decision we are no longer eligible for up to $168.8 million in clinical and regulatory milestone payments under the 2016 Agreement.

We are evaluating AG-270 in a phase 1 trial in multiple tumor types carrying an MTAP deletion. The first part of the trial, was a dose-escalation of AG-270 and is complete. The next part of the trial consists of two arms evaluating AG-270 in combination with taxanes. One arm of the trial will test AG-270 in combination with docetaxel in MTAP-deleted non-small cell lung cancer and the other arm will test AG-270 in combination with nab-paclitaxel and gemcitabine in MTAP-deleted pancreatic ductal adenocarcinoma. Both combination arms are enrolling patients, although we experienced disruptions related to the COVID-19 pandemic.

AG-636: Targeting DHODH for the treatment of hematologic malignancies

We have discovered a lineage-specific dependence on DHODH in hematologic malignancies, particularly AML and diffuse large B-cell lymphoma. DHODH catalyzes a critical step in the biosynthesis of pyridimidines, which are critical for the production of RNA and DNA. We believe that DHODH inhibition will be differentiated from standard-of-care therapies, both by exhibiting activity in cancers that are resistant to standard-of-care chemotherapeutics and through a mechanism of anti-tumor effect that combines cell growth arrest and cellular differentiation.

We were evaluating AG-636, an inhibitor of DHODH, licensed to us from Aurigene in a phase 1 dose-escalation trial in subjects with advanced lymphomas. In the first quarter of 2020, we made the decision to halt internal development of AG-636, due to limited enrollment in this trial, and will continue to wind down the trial until the close of the proposed sale to Servier.

AG-946: Next-generation PKR Activator

•We are developing AG-946, a next-generation PKR activator, for the potential treatment of hemolytic anemias. We are evaluating AG-964, in a phase 1 trial of AG-946 in healthy volunteers and in patients with SCD. The trial is currently enrolling healthy volunteers, although we experienced disruptions related to the COVID-19 pandemic.

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Other research and platform programs

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

Selling, general and administrative expenses

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

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

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

Under Accounting Standards Codification 606, Revenue from Contracts with Customers, or ASC 606, revenue is recognized when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product Revenue

We generate product revenue from sales of TIBSOVO® to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. The Customers subsequently resell TIBSOVO® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of TIBSOVO®.

The performance obligation related to the sale of TIBSOVO® is satisfied and revenue is recognized when the Customer obtains control of the product, which occurs at a point in time, typically upon delivery to the Customer.

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allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products.

Contractual Adjustments. We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers.

Chargebacks and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.

Government Rebates. Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.

Returns. We estimate the amount of product sales that may be returned by Customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized. We currently estimate product return liabilities using the expected value method, based on available industry data, including our visibility into the inventory remaining in the distribution channel.

Collaboration Revenue

We apply the provisions of ASC 808, Collaborative Arrangements, when accounting for our collaboration agreements. We evaluate the presentation of amounts due from our collaborative partners associated with activities in the collaborative arrangement based on the nature of each activity. For transactions with customers, we have reported revenues and costs in accordance with ASC 606 and ASC 606-10-55-36 through 55-40, Principal versus Agent Considerations. We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract based on the relative standalone selling prices, or SSPs, of the goods or services provided; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

The transaction price for each collaboration agreement is determined based on the amount of consideration we expect to be entitled to for satisfying all performance obligations within the agreement. Significant judgment may be required in determining the amount of variable consideration to be included in the transaction price. We use the most likely amount and expected value methods to determine variable consideration and will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

As part of the initial accounting for these arrangements, we must develop assumptions that require judgment to determine the SSP for each performance obligation identified in the contract. We use these key assumptions to determine the SSP, which include forecast of revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

We recognize the transaction price allocated to upfront license payments as revenue upon delivery of the license to the customer and resulting ability of the customer to use and benefit from the license, if the license is determined to be distinct from the other performance obligations identified in the contract. If the license is not considered to be distinct from the other performance obligations, we exercise judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied (i) at a point in time, but only for licenses determined to be distinct from other performance obligations in the contract, or (ii) over time; and, if over time, the appropriate method of measuring progress for

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purposes of recognizing revenue from license payments. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

A significant portion of revenue generated from our collaboration agreements with Celgene relates to the provision of research and development services whereby revenue is recognized under an input method using the ratio of effort incurred to date compared to the total estimated effort required to complete the performance obligation. The calculation of the total estimated effort includes the total amount of forecasted costs associated with the completion of discovery, pre-clinical or clinical trials, as well as the assumed timing of these activities and estimated patient populations. Such cost estimates include forecasted direct labor and material costs, subcontractor costs, and external CRO costs.

Milestone Revenue (variable consideration)

Many of our collaboration agreements also entitle us to additional payments upon the achievement of performance-based milestones. These milestones are generally categorized into three types: development milestones, which are generally based on the initiation of clinical trials; regulatory milestones, which are generally based on the submission, filing or approval of regulatory applications such as an NDA in the U.S.; and sales-based milestones, which are generally based on meeting specific thresholds of sales in certain geographic areas during a specified period. Upfront and ongoing development milestones that we receive pursuant to our collaboration agreements are not subject to refund if the development activities are not ultimately successful.

For each collaboration agreement that provides for development milestone payments, we evaluate whether it is probable that the consideration associated with each milestone will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are considered constrained and excluded from the transaction price until they meet this threshold. Milestones tied to regulatory approval, and therefore not within our control, are considered constrained until such approval is received. At the end of each subsequent reporting period, we re-evaluate the probability of a significant reversal of the cumulative revenue recognized for our milestones, and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues from collaborators and loss in the period of adjustment. For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, we recognize revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur.

Liability related to sale of future revenue

We treat the sale of future revenue to RPI as a debt financing, as we have significant continuing involvement in the generation of the cash flows. As result, we recorded the proceeds from this transaction as a liability related to the sale of future revenue to be amortized to interest expense using the effective interest rate method over the life of the arrangement.

The liability related to sale of future revenue and the related interest expense are based on our current estimates of future royalties expected to be paid over the life of the arrangement. We will periodically assess the expected royalty payments using forecasts from external sources. To the extent our future estimates of royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than its previous estimates, we will prospectively recognize related non-cash interest expense.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. Certain service providers invoice us in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to: (i) CROs and other third parties in connection with clinical studies and preclinical development activities; (ii) investigative sites in connection with clinical studies; and (iii) third parties related to product manufacturing, development and distribution of clinical supplies.

We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our

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estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.

Stock-based compensation

We account for stock-based compensation awards in accordance with ASC 718, Compensation –Stock Compensation. For stock-based awards granted to employees, non-employees and members of the board of directors for their services and for participation in our employee stock purchase plan, we estimate the grant date fair value of each option award using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires us to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock.

Expected term. We use the “simplified method” as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share Based Payments, to estimate the expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the contractual term of ten years and the weighted-average vesting term of the stock options, taking into consideration multiple vesting tranches. We utilize this method due to lack of historical data and the plain-vanilla nature of our share-based awards.

Volatility. We use a weighted-average of expected volatility based on the volatilities of a representative group of publicly traded biopharmaceutical companies, including ourselves. The expected volatility has been determined using a weighted-average of the historical volatilities of the representative group of companies for a period equal to the expected term of the option grant.

Risk-free rate. The risk-free rate is based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of the options being valued.

Dividends. We have never paid, and do not anticipate paying, any cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero in the option-pricing model.

Forfeitures. We account for forfeitures as they occur and, therefore, do not estimate forfeitures.

For awards subject to service-based vesting conditions, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period. For awards subject to both performance and service-based vesting conditions, we recognize stock-based compensation expense over the remaining service period if the performance condition is considered probable of achievement using management’s best estimates.

Results of Operations

Certain prior-year amounts have been reclassified to conform with current presentation.

Comparison of years ended December 31, 2020, 2019 and 2018

Total Revenue

Revenues:

Total Revenue – 2020 vs 2019 – The increase in total revenue of $85.3 million in 2020 compared to 2019 was primarily due to an increase in product revenue of $61.2 million and an increase in collaboration revenue - related party of $29.0 million. The increase in product revenue was primarily the result of increased sales volume of TIBSOVO®. The increase in collaboration revenue-related party was primarily due to our updated estimate of the future costs of research and development services to complete one of our performance obligations under the 2016 Agreement which had been recognized over time.

Total Revenue – 2019 vs 2018 – The increase in total revenue of $23.5 million in 2019 compared to 2018 was primarily due to an increase in product revenue of $46.0 million partially offset by a decrease in collaboration revenue - related party of $21.4 million. The increase in product revenue related to a full year of sales of TIBSOVO® in 2019 as compared to a partial year of

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sales in 2018. The decrease in collaboration revenue-related party was primarily due to the $15.0 million milestone payment related to Celgene's filing of an MAA with the EMA for IDHIFA® for IDH2 mutant-positive R/R AML in 2018.

We generate product revenue from sales of TIBSOVO® to Customers. If the proposed sale to Servier of our oncology business is completed, we will no longer sell TIBSOVO® and our product revenue will significantly decrease until such time as we commercialize another product candidate.

Under the 2010 Agreement with Celgene, we are reimbursed for costs incurred for our co-commercialization efforts and development activities. If the proposed sale to Servier of our oncology business is completed, Servier will acquire our co-commercialization right and responsibilities for BMS’s IDHIFA®, and our collaboration revenue – related party will significantly decrease. Further, the $25.0 million milestone remaining under the 2010 Agreement after the sale of our IDHIFA® royalty revenue to RPI, will be payable to Servier following the close of the proposed sale.

As partial consideration for our proposed sale to Servier, we are entitled to a royalty of 5% of U.S. net sales of TIBSOVO® from the closing through the loss of exclusivity of TIBSOVO® and a royalty of 15% of U.S. net sales of vorasidenib from the first commercial sale of vorasidenib through loss of exclusivity of vorasidenib. However, we cannot predict what success, if any, Servier may have in the United States with respect to sales of TIBSOVO® and vorasidenib and, therefore, the amount of royalty payments that we can expect to receive from Servier under the terms of the Purchase Agreement prior to the loss of exclusivity of these products.

Total Operating Expenses

Cost and expenses:

Total Operating Expenses – 2020 vs 2019 – The decrease in total operating expenses of $24.9 million in 2020 compared to 2019 was primarily due to a decrease of $43.4 million in research and development expenses, which is described below under Research and Development Expenses, partially offset by an increase of $17.0 million in selling, general and administrative expense due to higher personnel costs, including stock-based compensation expense, related to additional hiring for our workforce. Included in selling, general and administrative expense is approximately $5.0 million in professional fees related to entering into the proposed sale transaction with Servier. In addition, our cost of sales increased moderately in 2020 as we continue to deplete our finished goods inventory that was expensed prior to receiving FDA approval of TIBSOVO®.

Total Operating Expenses – 2019 vs 2018 – The increase in total operating expenses of $87.4 million in 2019 compared to 2018 was primarily due to an increase of $69.6 million in research and development expenses, which is described below under Research and Development Expenses.

Cost of sales consists primarily of manufacturing costs for sales of TIBSOVO®. If our proposed sale of our oncology business to Servier is completed, our cost of sales will significantly decrease until such time as we commercialize another product candidate.

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Research and Development Expenses

Our research and development expenses, by major program, are outlined in the table below:

Total Research and Development Expenses – 2020 vs 2019 – The decrease in research and development expenses of $43.4 million in 2020 compared to 2019 was primarily due to a $46.5 million decrease in our direct expenses. The decrease in direct expenses was primarily due to a $27.2 million decrease in ivosidenib costs, a $5.7 million decrease in AG-636 costs, and a $5.2 million decrease in other research and platform programs. The decrease in ivosidenib costs was primarily due to decreased trial activities for the ClarIDHy trial and decreased clinical costs driven by $6.5 million in milestones achieved by HOVON during the year ended December 31, 2019 for the initiation of the HO150/AMLSG29 trial. The decrease in AG-636 costs was primarily due to the decision to halt internal development of AG-636 in the first quarter of 2020 due to limited trial enrollment, and a $2.0 million milestone payment due to Aurigene upon first patient dosing within the phase 1 lymphoma trial in the second quarter of 2019. The decrease in other research and platform programs was primarily driven by planned decreased activity on various exploratory and discovery activities and a $4.0 million upfront payment for exploratory efforts in the second quarter of 2019.

Total Research and Development Expenses – 2019 vs 2018 – The increase in research and development expenses of $69.6 million in 2019 compared to 2018 was primarily due to a $49.8 million increase in our direct expenses and a $19.8 million increase in our indirect expenses. The increase in direct expenses of $49.8 million was primarily due to a $16.2 million increase for mitapivat driven by continuing enrollment and ongoing trial activities for ACTIVATE, ACTIVATE-T, DRIVE PK and related rollover studies, a $16.1 million increase for vorasidenib (AG-881) driven by clinical start up activities for the phase 3 INDIGO trial including clinical diagnostic costs, and research support activities including clinical pharmacology studies, and a $7.6 million increase in other research and platform program expenses driven by our other research programs due to the ongoing progression of our product pipeline. The increase in indirect expenses of $19.8 million was primarily due to a $10.1 million increase in facility and IT related expenses primarily driven by the new leasing space that we entered into in 2019 and associated costs and a $9.7 million increase in employee related expenses driven by additional hiring during the year to support increased clinical program activity.

If our proposed sale to Servier is completed, we will no longer operate the oncology business. We will be a smaller, less diversified company with a more limited business concentrated on GDDs. As a result, our direct research and development expenses for ivosidenib, enasidenib, vorasidenib, AG-270 and AG-636 will cease, and our direct research and development expenses will largely be concentrated on mitapivat and AG-946.

Interest Income and Expense

Non-cash interest expense for the sale of future revenue (17,832) — —

Interest Income and Non-Cash Interest Expense for the Sale of Future Revenue – 2020 vs 2019 – The decrease in interest income, net in 2020 compared to 2019 is primarily attributable to the decrease in interest rates at the end of the first quarter of 2020, which reduced the interest rates earned by 0.50% to 1.50% from prior periods and the decrease in our outstanding marketable securities balance for the year ended December 31, 2020. The non-cash interest expense for the sale of future

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revenue in 2020 was due to the interest expense associated with the sale of future revenue to RPI recorded in the year ended December 31, 2020.

Interest Income and Expense – 2019 vs 2018 – The decrease in interest income, net in 2019 compared to 2018 is primarily driven by lower investment balances in 2019 due to lower interest earned on investments. The lower interest earned on investments in 2019 was primarily due to the amount and timing of the receipt of funds of $277.2 million in November 2019 from a follow-on common stock offering compared to $516.2 million in January 2018 from a follow-on common stock offering.

Loss from Operations and Net Loss

Loss from Operations and Net Loss – 2020 vs 2019 – The decrease in loss from operations and net lossin 2020 compared to 2019 is primarily driven by higher total revenue as described above in Total Revenue and lower operating expenses as described above in Total Operating Expenses.

Loss from Operations and Net Loss – 2019 vs 2018 – The increase in loss from operations and net lossin 2019 compared to 2018 is primarily driven by higher operating expenses as described above in Total Operating Expenses.

Liquidity and Capital Resources

Sources of liquidity

Since our inception, and through December 31, 2020, we have funded our operations through upfront, milestone, extension, cost reimbursement and royalty payments related to our collaboration agreements, product sales, proceeds from the rale of our royalty rights, proceeds received from our issuance of preferred stock, our initial public offering and concurrent private placement of common stock to an affiliate of Celgene, and our follow-on public offerings.

On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib), as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million. Under the 2010 Agreement, we remain eligible to receive a $25.0 million potential milestone payment for the enasidenib program. The potential milestone payment is a $25.0 million milestone payment upon achievement of a specified ex-U.S. commercial milestone event, as well as reimbursement for costs incurred for our co-commercialization efforts and development activities.

On April 30, 2020, we entered into an at-the-market sales agreement, or the 2020 sales agreement, with Cowen & Company LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $250.0 million through Cowen pursuant to a universal shelf registration statement on Form S-3 filed with the SEC on April 30, 2020. As of December 31, 2020, $250.0 million in common stock remained available for future issuance under the 2020 sales agreement.

In November 2019, we completed a public offering of 9,487,500 shares of common stock at an offering price of $31.00 per share. We received net proceeds from this offering of $277.2 million, after deducting underwriting discounts and commissions paid by us, certain of which are subject to reimbursement.

In January 2018, we completed a public offering of 8,152,986 shares of common stock at an offering price of $67.00 per share. We received net proceeds from this offering of $516.2 million, after deducting underwriting discounts and commissions paid by us.

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

In December 2020, we entered into the Purchase Agreement with Servier. The base purchase price of $1.8 billion is subject to a working capital adjustment and will increase or decrease based on the amount of working capital of the oncology business as of the completion of the transaction relative to a specified working capital target. It is not possible to determine with precision the amount of working capital the oncology business may have as of the completion of the transaction. It is possible that the working capital adjustment may result in a meaningful reduction to the purchase price. Whether the regulatory approval milestone for vorasidenib will be achieved is also subject to various risks and uncertainties. The transaction includes the sale of

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TIBSOVO®, a current source of our revenue, and vorasidenib. We cannot predict what success, if any, Servier may have in the United States with respect to sales of TIBSOVO® and vorasidenib and, therefore, the amount of royalty payments that we can expect to receive from Servier under the terms of the Purchase Agreement prior to the loss of exclusivity of these products.

Our board of directors may cause us to terminate the Purchase Agreement in order to enter into a definitive agreement relating to a superior proposal, subject to complying with certain conditions set forth in the Purchase Agreement. If we terminate the Purchase Agreement in order to enter into definitive agreements with respect to a superior proposal, we may be required to pay to Servier a termination fee of $45 million prior to or concurrently with such termination.

Cash flows

The following table provides information regarding our cash flows for the years ended December 31, 2020, 2019 and 2018:

Net cash used in operating activities

During the year ended December 31, 2020, we received $123.8 million from sales of TIBSOVO®, $7.9 million in royalty payments and $6.1 million in cost reimbursements related to our Collaboration Agreements with Celgene, $7.0 million in interest received, and $3.6 million in cost reimbursements related to our CStone Agreement. These amounts were offset by operating expenses driven by research and development costs described above in Research and Development Expenses and increased staffing needs due to our expanding operations. Net cash used in operating activities does not include the $5.0 million in professional fees related to entering into the proposed sale transaction with Servier in the fourth quarter of 2020.

During the year ended December 31, 2019, we received $60.7 million from product sales of TIBSOVO®, $19.1 million in cost reimbursements and royalty payments under our collaboration agreement with Celgene, and a $5.0 million milestone payment under the CStone Agreement. The significant increase in product sales of TIBSOVO® was primarily due to having a full year of sales in 2019. These amounts were offset by increased operating expenses that related to increases in clinical study costs due to advancements in our most advanced product candidates, commercialization efforts, expanded facilities and increased staffing needs due to our expanding operations.

During the year ended December 31, 2018, we received $10.0 million from product sales of TIBSOVO®, $20.1 million in cost reimbursements and royalty payments and a $15.0 million milestone payment under our collaboration agreements with Celgene and $12.0 million under the CStone Agreement. These amounts were offset by increased operating expenses that related to increases in clinical study costs due to advancements in our most advanced product candidates, commercialization efforts, expanded facilities and increased staffing needs due to our expanding operations.

Net cash provided by (used in) investing activities

The cash provided by investing activities for the year ended December 31, 2020 was primarily the result of lower purchases of marketable securities than proceeds from maturities and sales of marketable securities, offset by $14.9 million in purchases of property and equipment.

The cash provided by investing activities for the year ended December 31, 2019 was primarily the result of lower purchases of marketable securities than proceeds from maturities and sales of marketable securities, offset by $12.2 million in purchases of property and equipment.

The cash used in investing activities for the year ended December 31, 2018 was primarily the result of higher purchases of marketable securities than proceeds from maturities and sales of marketable securities, and $7.0 million in purchases of property and equipment.

Net cash provided by financing activities

The cash provided by financing activities for the year ended December 31, 2020 was primarily the result of net proceeds of $250.5 million from the sale of our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib) and our

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ex-US regulatory milestones to RPI in June 2020, and the $11.3 million of proceeds received from stock option exercises and purchases made pursuant to our employee stock purchase plan.

The cash provided by financing activities for the year ended December 31, 2019 was primarily the result of proceeds of $277.2 million from the November 2019 follow-on public offering, net of underwriting discounts and commissions, as well as proceeds of $12.5 million received from stock option exercises and purchases made pursuant to our employee stock purchase plan.

The cash provided by financing activities for the year ended December 31, 2018 was primarily the result of proceeds of $516.2 million from the January 2018 follow-on public offering, net of underwriting discounts and commissions, as well as proceeds of $30.2 million received from stock option exercises and purchases made pursuant to our employee stock purchase plan.

Funding requirements

Until the completion of the proposed sale of our oncology business to Servier, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue to commercialize TIBSOVO®, and continue the research, development and clinical trials of, and seek additional marketing approvals for, our product candidates. If we obtain additional marketing approval for any of our other product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of Celgene, CStone or other partners. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

We expect that our existing cash, cash equivalents and marketable securities as of December 31, 2020, together with anticipated product revenue, anticipated interest income and anticipated expense reimbursements under our collaboration and license agreements, but excluding any additional program-specific milestone payments or any proceeds from the proposed sale of our oncology business to Servier, if such sale is consummated, will enable us to fund our operating expenses and capital expenditure requirements to the end of 2022. Following the completion of the transaction with Servier and any subsequent shareholder returns, we expect to have sufficient capital to fund operations through major catalysts and to cash-flow positivity without the need to raise additional equity. Our future capital requirements will depend on many factors, including:

•the timing and likelihood of the closing of the sale of our oncology business to Servier and the amount of consideration we may receive in connection with the sale;

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

•the success of and developments regarding, our collaborations;

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

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

•commercialization expenses related to approved medicines;

•levels of product revenue from sales of approved medicines;

•the costs associated with preparation for the potential commercial launch of one or more of our product candidates;

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

•our ability to successfully execute on our strategic plans;

•operational delays due to the ongoing COVID-19 pandemic; and

•the extent to which we acquire or in-license, or monitor or out-license, other medicines and technologies.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other nondilutive strategic transactions. We do not have any committed potential external source of funds other than our collaborations, and the proposed sale of our oncology business to Servier. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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

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Off-Balance Sheet Arrangements

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

Contractual Obligations

The following table summarizes our significant contractual obligations as of the payment due date by period at December 31, 2020:

Payments due by period

(In thousands) Total Lessthan1 year 1-3years 3-5years Morethan5 years

We enter into agreements in the normal course of business with CROs for clinical trials and contract manufacturing organizations, or CMOs, for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor, and are thus not included in the contractual obligations table.

Other than the specific payments noted in the table of contractual obligations, we are obligated to make future milestone and royalty payments under our global license agreement with Aurigene, or the Aurigene Agreement. Financial terms of the Aurigene Agreement include potential future milestone payments of up to $15.0 million if we achieve certain development and regulatory milestones and low single-digit royalties on net product sales, if any. During the year ended December 31, 2019, upon initiation of the first phase 1 clinical trial for DHODH, we made a milestone payment of $2.0 million. We did not make any payments during the year ended December 31, 2020 and we do not expect to make any milestone payments during the next 12 months.

In addition, we are also party to other license agreements which include contingent payments. However, contingent payments related to these license agreements are not disclosed as the satisfaction of these contingent payments is uncertain at December 31, 2020 and, if satisfied, the timing of payment for these amounts was not reasonably estimable at December 31, 2020. Commitments related to the license agreements include contingent payments that will become payable if and when certain development, regulatory and commercial milestones are achieved. During the next 12 months, we do not expect to make milestone payments related to such license agreements.

Lastly, in connection with the proposed sale of our oncology business to Servier, if the agreement is terminated under specified conditions, we would be required to make a one-time payment of $45 million to Servier.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash, cash equivalents and marketable securities of $670.5 million, consisting primarily of investments in U.S. Treasuries, and government and corporate debt securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term marketable securities. Our marketable securities are subject to interest rate risk and could fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate and uniform 100 basis point increase in interest rates would have a material effect on the fair market value of our investment portfolio.

We are also exposed to market risk related to changes in foreign currency exchange rates. We have contracts with CROs and CMOs that are located in Asia and Europe that are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign currency exchange rate risk. As of December 31, 2020 and December 31, 2019, we had minimal or no liabilities denominated in foreign currencies.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of December 31, 2020, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control – Integrated Framework. Based on our assessment, our management has concluded that, as of December 31, 2020, our internal control over financial reporting is effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(1) Financial Statements

The following documents are included on pages F-1 through F-39 attached hereto and are filed as part of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm 2

Consolidated Balance Sheets 4

Consolidated Statements of Operations 5

Consolidated Statements of Comprehensive Loss 6

Consolidated Statements of Stockholders’ Equity 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements 9

(2) Financial Statement Schedules

Schedules have been omitted since they are either not required or not applicable or the information is otherwise included herein.

(3) Exhibits

Exhibit Number Description of Exhibit Incorporated by Reference FiledHerewith

Form FileNumber Date of Filing ExhibitNumber

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Exhibit Number Description of Exhibit Incorporated by Reference FiledHerewith

Form FileNumber Date of Filing ExhibitNumber

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Exhibit Number Description of Exhibit Incorporated by Reference FiledHerewith

Form FileNumber Date of Filing ExhibitNumber

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Exhibit Number Description of Exhibit Incorporated by Reference FiledHerewith

Form FileNumber Date of Filing ExhibitNumber

21.1 Subsidiaries of the Registrant X

101.INS XBRL Instance Document X

101.SCH XBRL Taxonomy Extension Schema Document X

101.CAL XBRL Taxonomy Calculation Linkbase Document X

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB XBRL Taxonomy Label Linkbase Document X

101.PRE XBRL Taxonomy Presentation Linkbase Document X

# Indicates management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AGIOS PHARMACEUTICALS, INC.

February 25, 2021 By: /s/ Jacqualyn A. Fouse

Jacqualyn A. Fouse, Ph.D.Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

Jacqualyn A. Fouse, Ph.D.

Jonathan Biller

Carman Alenson

/s/ Paul J. Clancy Director February 25, 2021

Paul J. Clancy

/s/ Ian Clark Director February 25, 2021

Ian Clark

/s/ Kaye Foster Director February 25, 2021

Kaye Foster

/s/ Maykin Ho Director February 25, 2021

Maykin Ho, Ph.D.

/s/ John M. Maraganore Director February 25, 2021

John M. Maraganore, Ph.D.

/s/ David Scadden Director February 25, 2021

David Scadden, M.D.

/s/ David P. Schenkein Director February 25, 2021

David P. Schenkein, M.D.

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Agios Pharmaceuticals, Inc.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm 2

Consolidated Balance Sheets 4

Consolidated Statements of Operations 5

Consolidated Statements of Comprehensive Loss 6

Consolidated Statements of Stockholders’ Equity 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements 9

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Agios Pharmaceuticals, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Agios Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue from contracts with customers in 2018.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Liability related to sale of future revenue

As described in Notes 3 and 10 to the consolidated financial statements, on June 11, 2020 the Company sold its tiered, sales-based royalty rights on worldwide net sales of IDHIFA®, as well as rights to receive up to $55 million in regulatory milestone payments from Bristol Myers Squibb to Royalty Pharma (“RPI”) for $255 million. Management accounted for the sale of future revenue to RPI as a debt financing, as the Company continues to have significant continuing involvement in the generation of the cash flows. Management applied significant judgment in determining the appropriate accounting treatment for the transaction. The liability related to sale of future revenue and the related interest expense are based on Management’s current estimates of future royalties expected to be paid over the life of the arrangement. Management periodically assesses the expected royalty payments using forecasts from external sources. The Company recognized non-cash interest expense for the sale of future revenue of $17.8 million for the year ended December 31, 2020, and the liability related to the sale of future revenue was $261.3 million as of December 31, 2020.

The principal considerations for our determination that performing procedures relating to the liability related to the sale of future revenue is a critical audit matter are the significant judgment by management in determining the appropriate accounting for the transaction and the valuation of the liability related to sale of future revenue.This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures and evaluating management’s determination of the accounting for the transaction and the assumption related to the current estimates of future royalties expected to be paid over the life of the arrangement.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s determination of the accounting treatment for the transaction, as well as controls over the development of the assumption related to the current estimates of future royalties expected to be paid over the life of the arrangement. These procedures also included, among others, evaluating whether the transaction has been properly accounted for in accordance with the relevant accounting standards, testing management’s process for determining the valuation of the liability related to the sale of future revenue, testing the completeness and accuracy of underlying data used in determining the valuation of the liability, and evaluating the significant assumption used by management related to the current estimate of future royalties expected to be paid over the life of the arrangement. Evaluating management’s assumption related to the current estimate of future royalties expected to be paid over the life of the arrangement involved evaluating whether the assumption used by management was reasonable considering the terms of the agreement, consistency with external market and industry data, and consistency with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

We have served as the Company’s auditor since 2017.

F-3

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Agios Pharmaceuticals, Inc.

Consolidated Balance Sheets

Assets

Current assets:

Collaboration receivable – related party 2,123 1,539

Collaboration receivable – other 1,948 1,928

Royalty receivable – related party — 2,900

Prepaid expenses and other current assets 23,651 24,177

Other non-current assets 1,125 —

Liabilities and stockholders’ equity

Current liabilities:

Deferred revenue – related party — 10,933

Financing lease liabilities 317 273

Deferred revenue, net of current portion – related party — 50,580

Operating lease liabilities, net of current portion 97,458 106,074

Financing lease liabilities, net of current portion 331 673

Commitments and contingent liabilities (Note 11)

Stockholders’ equity:

Accumulated other comprehensive income 105 202

Total liabilities and stockholders’ equity $ 852,952 $ 890,741

See accompanying Notes to Consolidated Financial Statements.

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Agios Pharmaceuticals, Inc.

Consolidated Statements of Operations

Revenues:

Cost and expenses:

Non-cash interest expense for the sale of future revenue (17,832) — —

Net loss per share – basic and diluted $ (4.74) $ (6.86) $ (6.03)

See accompanying Notes to Consolidated Financial Statements.

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Agios Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Loss

Other comprehensive (loss) income:

Unrealized (loss) gain on available-for-sale securities (97) 2,373 (782)

See accompanying Notes to Consolidated Financial Statements.

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Agios Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts) Shares Amount

Unrealized loss on available-for-sale securities — — — (782) — (782)

Stock-based compensation expense — — 73,357 — — 73,357

Unrealized gain on available-for-sale securities — — — 2,373 — 2,373

Stock-based compensation expense — — 72,373 — — 72,373

Other — — — — — —

Unrealized loss on available-for-sale securities — — — (97) — (97)

Stock-based compensation expense — — 75,122 — — 75,122

Issuance of common stock for follow-on offering — — — — — —

Other — — — — — —

See accompanying Notes to Consolidated Financial Statements.

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Agios Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

Operating activities

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

Loss on disposal of property and equipment — 1,052 20

Non-cash operating lease expense 8,982 8,532 —

Non-cash interest expense associated with the sale of future revenue 17,832 — —

Non-cash royalty revenue (7,294) — —

Changes in operating assets and liabilities:

Collaboration receivable – related party (584) 923 (14)

Collaboration receivable – other (20) (1,258) (670)

Prepaid expenses and other current and non-current assets (599) (7,742) 1,148

Operating lease liabilities (8,127) (6,861) —

Deferred rent — — (82)

Investing activities

Financing activities

Payments on financing lease obligations (336) (113) —

Reimbursement (payment) of public offering costs — — (391)

Proceeds from the sale of future revenue, net of issuance costs 250,537 — —

Supplemental disclosure of non-cash investing and financing transactions:

Proceeds from stock option exercises in other current assets $ — $ — $ 7

See accompanying Notes to Consolidated Financial Statements.

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Agios Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

Note 1. Nature of Business

References to Agios

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

Overview

Our pre-commercial clinical cancer product candidates are vorasidenib and AG-270.

Vorasidenib is an orally available, selective brain-penetrant pan-IDH mutant inhibitor. We are developing vorasidenib for the treatment of IDH mutant-positive low grade glioma and are currently evaluating vorasidenib in clinical trials.

AG-270 is an orally available selective potent inhibitor of methionine adenosyltransferase 2a, or MAT2A. We are currently evaluating AG-270 in a phase 1 dose-escalation and expansion trial in multiple tumor types carrying a methylthioadenosine phosphorylase, or MTAP, deletion.

AG-636 is an inhibitor of the metabolic enzyme dihydroorotate dehydrogenase, or DHODH. In the first quarter of 2020, we made the decision to halt internal development of AG-636, due to limited enrollment in this trial, and will continue to wind down the trial during 2021.We are currently evaluating AG-636 in the phase 1 dose-escalation trial in lymphoma.

The lead product candidate in our GDD portfolio, mitapivat, is an activator of both wild-type and mutant pyruvate kinase-R for the potential treatment of hemolytic anemias. We are currently evaluating mitapivat for the treatment of pyruvate kinase, or PK, deficiency, thalassemia and sickle cell disease, or SCD, in clinical trials. We are also developing AG-946, a next-generation PKR activator, for the potential treatment of hemolytic anemias and other indications.

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We are subject to risks common to companies in our industry including, but not limited to, uncertainties relating to conducting clinical research and development, the manufacture and supply of products for clinical and commercial use, obtaining and maintaining regulatory approvals and pricing and reimbursement for our products, market acceptance, managing global growth and operating expenses, availability of additional capital, competition, obtaining and enforcing patents, stock price volatility, dependence on collaborative relationships and third-party service providers, dependence on key personnel, potential litigation, product liability claims and government investigations.

Liquidity

On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib), as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million. Under the 2010 Agreement, we remain eligible to receive a $25.0 million potential milestone payment for the enasidenib program. The potential payment is a $25.0 million milestone payment upon achievement of a specified ex-U.S. commercial milestone event, as well as reimbursement for costs incurred for our co-commercialization efforts and development activities.

In November 2019, we completed a public offering of 8,250,000 shares of common at an offering price of $31.00 per share. We received net proceeds from this offering of $241.0 million, after deducting underwriting discounts and commissions paid by us. In addition, we granted the underwriters the right to purchase up to an additional 1,237,500 shares of common stock, which was exercised in November 2019, resulting in additional net proceeds to us of $36.2 million, after underwriting discounts and commissions. After giving effect to the full exercise of the over-allotment option, the number of shares sold by us in the public offering totaled 9,487,500 shares, and net proceeds to us totaled $277.2 million, after underwriting discounts and commissions.

As of December 31, 2020, we had cash, cash equivalents and marketable securities of $670.5 million. Although we have incurred recurring losses and expect to continue to incur losses for the foreseeable future, we expect our cash, cash equivalents and marketable securities to be sufficient to fund current operations for at least the next twelve months from the issuance of the financial statements. If the Company is unable to raise additional funds through equity or debt financings, the Company may be required to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market products or product candidates that the Company would otherwise prefer to develop and market itself.

Note 2. Proposed Sale of Oncology Business to Servier Pharmaceuticals, LLC (Servier)

The proposed sale has been approved by our Board of Directors. The parties’ obligations to consummate the proposed sale are subject to customary conditions, including the approval of the sale by the holders of at least a majority of our outstanding shares of common stock, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of required regulatory approvals in Germany.

Subject to certain exceptions, we and Servier have agreed to use reasonable best efforts to cause the sale to be completed. The Purchase Agreement includes certain termination provisions for both Servier and us and provides that, in connection with a

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termination of the Purchase Agreement under specified circumstances, we may be required to pay Servier a termination fee of $45 million.

We currently expect to complete the transaction at the end of the first quarter of or in the beginning of the second quarter of 2021.

Note 3. Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries, Agios Securities Corporation, Agios International Sarl, Agios Germany GmbH, Agios Netherlands B.V., Agios Italy S.R.L., Agios France SARL, and Agios Limited. All intercompany transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or U.S. GAAP.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain the pandemic or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Cash and cash equivalents

We consider highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at fair value.

Marketable securities

Marketable securities at December 31, 2020 and 2019 consisted of investments in U.S. Treasuries, government securities and corporate debt securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our marketable securities as available-for-sale pursuant to Accounting Standards Codification, or ASC, 320, Investments – Debt and Equity Securities. Marketable securities are recorded at fair value. Unrealized gains are included as a component of accumulated other comprehensive income in the consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. Realized gains and losses are included in investment income on a specific-identification basis.

At December 31, 2020 and 2019, we held both current and non-current investments. Investments classified as current have maturities of less than one year. Investments classified as non-current are those that: (i) have a maturity of one to two years, and (ii) we do not intend to liquidate within the next twelve months, although these funds are available for use and therefore classified as available-for-sale.

We review marketable securities for impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses, to determine if the impairment is credit-related or noncredit-related. Credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income, net of taxes. Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity of the impairment, collectibility of the security, and any adverse conditions specifically related to the security, an industry, or geographic area.

F-11

Fair value measurements

We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

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

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

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

Our financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market based approaches, and observable market inputs to determine value. After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2020 or 2019. Fair value information for these assets, including their classification in the fair value hierarchy is included in Note 4. Fair Value Measurements.

There have been no changes to the valuation methods during the years ended December 31, 2020 and 2019. We evaluate transfers between levels at the end of each reporting period.

The carrying amounts of collaboration receivable – related party, collaboration receivable – other, royalty receivable – related party, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values due to their short-term maturities.

Accounts receivable, net

Our trade accounts receivable arise from product sales and represent amounts due from specialty distributors and specialty pharmacy providers in the U.S. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. We reserve against these receivables for estimated losses that may arise from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.

Concentrations of credit risk

Financial instruments which potentially subject us to credit risk consist primarily of cash, cash equivalents, and marketable securities. We hold these investments in highly rated financial institutions, and, by policy, limit the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to any significant credit risk on these funds. We have no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts, or other hedging arrangements.

We are also subject to credit risk on our receivables, including trade receivables from our customers and collaboration and royalty receivables from Celgene and CStone Pharmaceuticals, or CStone. Concentrations of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due to the number of customers using our products. Our trade receivables arise from product sales and have standard payment terms that generally require payment within 30 to 60 days. We have evaluated the creditworthiness of our customers, including Celgene, and determined them to be creditworthy. To date we have not experienced any losses with respect to our receivables.

Inventory

Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out basis. Prior to the regulatory approval of our product candidates, we incur expenses for the manufacture of drug product that could potentially be available to support the commercial launch of those products. Until the date at which regulatory approval has been received or is otherwise considered probable, we record all such costs as research and development expenses. Upon approval of our wholly owned product, TIBSOVO®, by the FDA on July 20, 2018 for the treatment of adult patients with R/R AML with susceptible IDH1 mutation as detected by an FDA-approved test, we began to capitalize inventories of TIBSOVO®.

We perform an assessment of the recoverability of capitalized inventory during each reporting period and write down any excess and obsolete inventory to its estimated net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of sales in the consolidated statements of operations. The determination of whether inventory costs will be realizable requires the use of estimates by management. If

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actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required.

Property and equipment

Property and equipment consist of laboratory equipment, computer equipment and software, leasehold improvements, furniture and fixtures, and office equipment. Costs of major additions and betterment are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized.

Property and equipment is stated at cost, and depreciated using the straight-line method over the estimated useful lives of the respective assets:

Years

Laboratory equipment 5

Computer equipment and software 3

Furniture and fixtures 5

Office equipment 5

Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the improvement.

Impairment of long-lived assets

We periodically evaluate our long-lived assets for potential impairment in accordance with ASC 360, Property, Plant and Equipment. Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on the undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. We did not recognize any impairment charges through December 31, 2020.

Leases

We determine if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property or equipment for a period of time in exchange for consideration. If we can benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each of the component’s relative fair value.

Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the leasing arrangement. Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, in determining the operating lease liabilities, we use an estimate of our incremental borrowing rate. The incremental borrowing rate is determined using two alternative credit scoring models to estimate our credit rating, adjusted for collateralization. The calculation of the operating lease assets includes any lease payments made and excludes any lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

For operating leases, we record operating lease assets and lease liabilities in our consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Short-term leases, or leases that have a lease term of 12 months or less at commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

We have not entered into any material short-term leases or financing leases as of December 31, 2020.

Liability related to sale of future revenue

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For further discussion of the sale of future revenue, refer to Note 10, Sale of Future Revenue.

Amortization of issuance costs

We treated the liability related to sale of future revenue as a debt financing. As such, the long-term liability is initially recorded at its proceeds, net of deferred costs. Issuance costs, fees directly related to the sale of future revenue, are offset against initial carrying value of the long-term liability and are amortized on a straight-line basis over the remaining patent life of the product to an operating expense.

Revenue from contracts with customers

On January 1, 2018 we adopted ASC 606, Revenue from Contracts with Customers, under the modified retrospective method. Prior to January 1, 2018 we accounted for the consideration received under the Collaboration Agreements under ASC 605-25, Multiple Element Arrangements.

In adopting ASC 606, we applied the practical expedient that permits aggregating the effect of all contract modifications that occurred prior to January 1, 2018. No other practical expedients were used. Similar to the accounting under ASC 605-25, the 2016 Agreement was determined to be a modification of the 2010 Agreement and the AG-881 Agreements with Celgene.

Revenue is recognized when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determined to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Product revenue

We sell TIBSOVO®, our wholly owned product, to a limited number of specialty distributors and specialty pharmacy providers, or collectively, the Customers. The Customers subsequently resell TIBSOVO® to pharmacies or dispense directly to patients. In addition to distribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of TIBSOVO®.

Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration for which reserves are established and result from contractual adjustments, government rebates, returns and other allowances that are offered within the contracts with our Customers, healthcare providers, payors and other indirect customers relating to the sale of our products.

Contractual adjustments. We generally provide Customers with discounts, including prompt pay discounts, and allowances that are explicitly stated in the contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from certain Customers.

Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are estimated using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated channel mix and are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.

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Government rebates. Government rebates include Medicare, TriCare, and Medicaid rebates, which we estimate using the expected value method, based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program.

Collaboration revenue

We apply the provisions of ASC 808, Collaborative Arrangements, when accounting for our collaboration agreements. We evaluate the presentation of amounts due from our collaborative partners associated with activities in the collaborative arrangement based on the nature of each activity. For transactions with customers, we have reported revenues and costs in accordance with ASC 606 and ASC 606-10-55-36 through 55-40, Principal versus Agent Considerations. We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that have been determined to be within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract based on the relative standalone selling prices of the goods or services provided; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

The transaction price for each collaboration agreement is determined based on the amount of consideration we expect to be entitled to for satisfying all performance obligations within the agreement. Significant judgment may be required in determining the amount of variable consideration to be included in the transaction price. We use the expected value methods to determine variable consideration and will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

As part of the initial accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price, or SSP, for each performance obligation identified in the contract. We use these key assumptions to determine the SSP, which include forecast of revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

We recognize the transaction price allocated to upfront license payments as revenue upon delivery of the license to the customer and resulting ability of the customer to use and benefit from the license, if the license is determined to be distinct from the other performance obligations identified in the contract. If the license is considered to not be distinct from other performance obligations, we exercise judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied (i) at a point in time, but only for licenses determined to be distinct from other performance obligations in the contract, or (ii) over time; and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from license payments. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone revenue

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the initiation of clinical trials; regulatory milestones, which are generally based on the submission, filing or approval of regulatory applications such as a new drug application, or NDA, in the U.S.; and sales-based milestones, which are generally based on meeting specific thresholds of sales in certain geographic areas during a specified period. Upfront and ongoing development milestones per our collaboration agreements are not subject to refund if the development activities are not successful.

For each collaboration that includes development milestone payments, we evaluate whether it is probable that the consideration associated with each milestone will not be subject to a significant reversal in the cumulative amount of revenue recognized. Amounts that meet this threshold are included in the transaction price using the most likely amount method, whereas amounts that do not meet this threshold are considered constrained and excluded from the transaction price until they meet this threshold. Milestones tied to regulatory approval, and therefore not within our control, are considered constrained until such approval is received. At the end of each subsequent reporting period, we re-evaluate the probability of a significant reversal of the cumulative revenue recognized for our milestones, and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues from collaborators and loss in the period of adjustment. For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, we recognize revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur.

Adoption of ASC 606

We adopted ASC 606 using the modified retrospective method. Under this method, we recognized the cumulative effect of the change in the opening balance of accumulated deficit in the January 1, 2018 consolidated balance sheet.

The impact of the cumulative effect of the accounting changes upon the adoption of the standard is as follows:

(In thousands) December 31,2017 CumulativeEffect January 1,2018

AGIO US Equity

AGIO · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

AGIO US Equity☆

AGIO · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

AGIO US Equity