10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020 

OR

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

For the transition period from                      to                     

Commission File Number: 001-36065

ACCELERON PHARMA INC.

(Exact name of registrant as specified in its charter)

Delaware	2836	27-0072226
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

128 Sidney Street

Cambridge, MA 02139

(617) 649-9200

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

area code, of registrant’s principal executive offices)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o

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

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

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

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

As of July 31, 2020, there were 59,896,848 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Stockholders Equity for the three and six months ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	28
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 6.	Exhibits	30
SIGNATURES		31

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Acceleron Pharma Inc. 

Condensed Consolidated Balance Sheets 

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

(unaudited)

	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	283,521	$	237,677
Collaboration receivables (all amounts are with a related party)	39,752		8,547
Prepaid expenses and other current assets	19,388		10,000
Short-term investments	106,289		193,692
Total current assets	448,950		449,916
Property and equipment, net	7,671		6,812
Operating lease - right of use asset, net	21,116		23,908
Other assets	1,698		1,793
Long-term investments	—		22,477
Total assets	$	479,435	$	504,906
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,927	$	2,295
Accrued expenses	17,966		24,895
Operating lease liability - right of use	6,467		6,183
Total current liabilities	37,360		33,373
Operating lease liability - right of use, net of current portion	16,940		20,201
Warrants to purchase common stock	3,516		1,856
Total liabilities	57,816		55,430
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value: 175,000,000 shares authorized; 54,166,712 and 53,123,567 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	54		53
Additional paid-in capital	1,202,445		1,160,807
Accumulated deficit	(780,797)		(711,407)
Accumulated other comprehensive (loss) income	(83)		23
Total stockholders’ equity	421,619		449,476
Total liabilities and stockholders’ equity	$	479,435	$	504,906

See accompanying notes to these condensed consolidated financial statements.

3

Acceleron Pharma Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(amounts in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenue:
Collaboration revenue:
Milestone	$	25,000	$	25,000	$	25,000	$	25,000
Cost-sharing, net	3,678		2,666		6,502		5,447
Royalty	11,074		—		12,594		—
Total revenue (all amounts are with a related party)	39,752		27,666		44,096		30,447
Costs and expenses:
Research and development	38,251		34,765		75,917		67,536
Selling, general and administrative	20,414		14,037		38,663		24,851
Total costs and expenses	58,665		48,802		114,580		92,387
Loss from operations	(18,913)		(21,136)		(70,484)		(61,940)
Other income, net	466		3,230		1,113		6,003
Loss before income taxes	(18,447)		(17,906)		(69,371)		(55,937)
Income tax (provision) benefit	(4)		44		(20)		24
Net loss	$	(18,451)	$	(17,862)	$	(69,391)	$	(55,913)
Other comprehensive (loss) income:
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax	161		452		(106)		721
Comprehensive loss	$	(18,290)	$	(17,410)	$	(69,497)	$	(55,192)
Net loss per share- basic and diluted	$	(0.34)	$	(0.34)	$	(1.29)	$	(1.08)
Weighted-average number of common shares used in computing net loss per share- basic and diluted	53,860		52,689		53,610		51,912

See accompanying notes to these condensed consolidated financial statements.

4

Acceleron Pharma Inc. 

Condensed Consolidated Statements of Stockholders' Equity

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

(unaudited)

Three and Six Months Ended June 30, 2020

	Common Stock
	Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at December 31, 2019	53,123,567	$	53	$	1,160,807	$	(711,407)	$	23	$	449,476
Stock-based compensation	—	—		6,679		—		—		6,679
Exercise of stock options	295,757	—		8,485		—		—		8,485
Vesting of restricted stock units, net of shares withheld for taxes	77,949	—		(472)		—		—		(472)
Issuance of common stock related to ESPP	22,647	—		860		—		—		860
Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(267)		(267)
Net loss	—	—		—		(50,939)		—		(50,939)
Balance at March 31, 2020	53,519,920	53		1,176,359		(762,346)		(244)		413,822
Stock-based compensation	—	—		7,140		—		—		7,140
Exercise of stock options	617,441	1		19,609		—		—		19,610
Vesting of restricted stock units, net of shares withheld for taxes	29,351	—		(663)		—		—		(663)
Unrealized gain on available-for-sale securities	—	—		—		—		161		161
Net loss	—	—		—		(18,451)		—		(18,451)
Balance at June 30, 2020	54,166,712	$	54	$	1,202,445	$	(780,797)	(83)		$	421,619

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Three and Six Months Ended June 30, 2019

	Common Stock
	Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Comprehensive Loss		Total Stockholders' Equity
Balance at December 31, 2018	46,260,747	$	47	$	879,099	$	(586,549)	$	(560)	$	292,037
Stock-based compensation	—	—		6,992		—		—		6,992
Issuance of common stock, net of expense $500	6,151,163	6		248,124		—		—		248,130
Exercise of stock options	35,919	—		766		—		—		766
Vesting of restricted stock units, net of shares withheld for taxes	75,028	—		(393)		—		—		(393)
Issuance of common stock related to ESPP	19,661	—		788		—		—		788
Unrealized gain on available-for-sale securities, net of tax	—	—		—		—		268		268
Net loss	—	—		—		(38,053)		—		(38,053)
Balance at March 31, 2019	52,542,518	53		1,135,376		(624,602)		(292)		510,535
Stock-based compensation	—	—		5,012		—		—		5,012
Exercise of stock options	64,174	—		1,760		—		—		1,760
Vesting of restricted stock units, net of shares withheld for taxes	146,162	—		—		—		—		—
Unrealized gain on available-for-sale securities, net of tax	—	—		—		—		452		452
Net loss	—	—		—		(17,862)		—		(17,862)
Balance at June 30, 2019	52,752,854	$	53	$	1,142,148	(642,464)		$	160	$	499,897

6

Acceleron Pharma Inc. 

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

	Six Months Ended June 30,
	2020		2019
Operating Activities
Net loss	$	(69,391)	$	(55,913)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,938		1,942
Stock-based compensation	13,819		12,004
Other non-cash items	1,563		404
Changes in assets and liabilities:
Prepaid expenses and other assets	(9,293)		(2,508)
Collaboration receivables (all amounts are with a related party)	(31,205)		1,592
Non-cash lease expense	2,792		2,502
Accounts payable	10,334		3,129
Accrued expenses	(6,998)		(1,744)
Operating lease obligations	(2,977)		(1,874)
Other changes in operating assets and liabilities	17		(42)
Net cash used in operating activities	(89,401)		(40,508)
Investing Activities
Purchases of investments	(58,539)		(293,913)
Proceeds from sales and maturities of investments	168,385		104,201
Purchases of property and equipment	(2,420)		(1,273)
Net cash provided by (used in) investing activities	107,426		(190,985)
Financing Activities
Proceeds from issuance of common stock from public offering, net of issuance costs	—		248,130
Net proceeds from exercises and vesting of stock awards, ESPP contributions, and exercise of warrants to purchase common stock	27,819		2,920
Net cash provided by financing activities	27,819		251,050
Net increase in cash, cash equivalents and restricted cash	45,844		19,557
Cash, cash equivalents and restricted cash at beginning of period	239,274		145,649
Cash, cash equivalents and restricted cash at end of period	$	285,118	$	165,206
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	$	352	$	338
Capitalized follow-on public offering costs included in accrued expenses	$	423	$	—

See accompanying notes to these condensed consolidated financial statements.

7

Acceleron Pharma Inc. 

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

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

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

2. Basis of Presentation

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

The accompanying interim condensed consolidated financial statements are unaudited and reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of June 30, 2020, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, have not changed, and the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2019. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019, and its cash flows for the six months ended June 30, 2020 and 2019. 

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

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

3. Use of Estimates 

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

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these consolidated financial statements, management used significant estimates in the following areas, among others: accrued and prepaid clinical

8

expenses, contract manufacturing expense, stock-based compensation expense, revenue recognition and the recoverability of the Company's net deferred tax assets and related valuation allowance.

4. Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one operating segment, which is the discovery, development, and commercialization of highly innovative therapeutics to treat serious and rare diseases.

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

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

The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified all of its marketable securities at June 30, 2020 as “available-for-sale” pursuant to ASC 320, Investments – Debt and Equity Securities. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their maturities as well as the time period the Company intends to hold such securities.

The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income. The cost of securities sold is based on the specific identification method. The Company includes in interest income interest and dividends on securities classified as available-for-sale.

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

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

The following is a summary of available-for-sale securities with unrealized losses as of June 30, 2020 (in thousands):

	Less than 12 months
	Fair Value		Unrealized Losses
Corporate obligations	21,330		(6)
U.S. government agency securities	49,984		(3)
Total available-for sale securities in an unrealized loss position	$	71,314	$	(9)

There were no securities in an unrealized loss for greater than 12 months as of June 30, 2020. The unrealized losses on the Company's available-for-sale securities were caused by central bank and market interest rate decreases on securities purchased at a premium. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company did not record an allowance for credit losses as of June 30, 2020.

Prior to January 1, 2020, the Company reviewed marketable securities for other-than-temporary impairment whenever the fair value of a marketable security was less than the amortized cost and evidence indicated that a marketable security’s carrying amount was not recoverable within a reasonable period of time. Other-than-temporary impairments of investments were recognized in the consolidated statements of operations if the Company had experienced a credit loss, had the intent to sell the

9

marketable security, or if it was more likely than not that the Company would be required to sell the marketable security before recovery of the amortized cost basis. Evidence considered in this assessment included reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.

The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2019 was $35.8 million. The aggregate fair value of securities held by the Company in an unrealized loss position for more than twelve months as of December 31, 2019 was zero. The aggregate unrealized loss for those securities in an unrealized loss position for more than twelve months was zero. The Company determined it did not hold any investments with any other-than-temporary impairment as of December 31, 2019.

The following is a summary of cash, cash equivalents and available-for-sale securities as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	283,522	$	—	$	(1)	$	283,521
Available-for-sale securities:
Corporate obligations	56,828		162		(6)		56,984
U.S. Treasury securities	49,026		33		(3)		49,056
Certificates of deposit	245		4		—		249
Total available-for-sale securities	$	106,099	$	199	$	(9)	$	106,289
Total cash, cash equivalents and available-for-sale securities	$	389,621	$	199	$	(10)	$	389,810

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	237,677	$	—	$	—	$	237,677
Available-for-sale securities:
Corporate obligations	124,676		219		(15)		124,880
U.S. Treasury securities	78,230		98		(1)		78,327
Certificates of deposit	490		3		—		493
Mortgage and other asset backed securities	12,476		5		(12)		12,469
Total available-for-sale securities	$	215,872	$	325	$	(28)	$	216,169
Total cash, cash equivalents and available-for-sale securities	$	453,549	$	325	$	(28)	$	453,846

6. Restricted Cash

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

	June 30,
	2020		2019
Cash and cash equivalents	$	283,521	$	163,609
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	285,118	$	165,206

As of June 30, 2020 and December 31, 2019, the Company maintained letters of credit totaling $1.6 million held in the form of certificates of deposit and money market funds as collateral for the Company's facility lease obligation and its credit cards.

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

10

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

The Company routinely assesses the creditworthiness of its collaboration partner. The Company has not experienced any material losses related to receivables from individual customers and collaboration partners, or groups of customers. The Company does not require collateral. Due to these factors, no allowance for credit losses has been recorded for the Company's collaboration receivables as of June 30, 2020.

8. Fair Value Measurements

The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input that is significant to each financial instrument as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	232,582	$	—	$	—	$	232,582
Corporate obligations	—		60,982		—		60,982
U.S. Treasury securities	—		64,054		—		64,054
Certificates of deposit	—		249		—		249
Total assets	$	232,582	$	125,285	$	—	$	357,867
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	3,516	$	3,516
Total liabilities	$	—	$	—	$	3,516	$	3,516

	December 31, 2019
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	193,867	$	—	$	—	$	193,867
Corporate obligations	—		138,369		—		138,369
U.S. Treasury securities	—		83,819		—		83,819
Certificates of deposit	—		493		—		493
Mortgage and other asset backed securities	—		12,470		—		12,470
Total assets	$	193,867	$	235,151	$	—	$	429,018
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	1,856	$	1,856
Total liabilities	$	—	$	—	$	1,856	$	1,856

The money market funds noted above are included in cash and cash equivalents in the accompanying condensed consolidated balance sheets. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the

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reporting period. There were no transfers within the hierarchy during the six months ended June 30, 2020 or the year ended December 31, 2019.

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

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

	Six Months Ended June 30,
	2020		2019
Beginning balance	$	1,856	$	1,491
Change in fair value	1,660		(102)
Ending balance	$	3,516	$	1,389

The fair value of the warrants to purchase common stock on the date of issuance and on each re-measurement date for those warrants classified as liabilities was estimated using either the Monte Carlo simulation framework, which incorporates future financing events over the remaining life of the warrants to purchase common stock, or for certain re-measurement dates, due to the warrants being deeply in the money, the Black-Scholes option pricing model. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. At each reporting period, the Company evaluates the best valuation methodology. At June 30, 2020, the Black-Scholes option pricing model was used.

9. Net Loss Per Share

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

	Three Months Ended    June 30,		Six Months Ended    June 30,
	2020	2019	2020	2019
Outstanding stock options	3,680	3,995	3,680	3,995
Common stock warrants	39	39	39	39
Shares issuable under employee stock purchase plan	13	13	13	13
Outstanding restricted stock units (1)	532	461	532	461
	4,264	4,508	4,264	4,508

(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note 15.

10. Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive loss consists of net loss and other comprehensive (loss) income, which includes certain changes in equity that are excluded from net loss. Comprehensive loss has been disclosed in the accompanying consolidated statements of operations and comprehensive loss. Accumulated other comprehensive (loss) income is presented separately on the consolidated balance sheets and consists entirely of unrealized holding gains and losses on investments as of June 30, 2020 and December 31, 2019.

11. Recent Accounting Pronouncements

Recently Adopted

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which the carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. On January 1, 2020 the Company adopted ASU 2016-13. For discussion regarding the impact of this accounting pronouncement and its amendments, refer to Note 5 within the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

In June 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. On January 1, 2020, the Company adopted ASU 2018-15 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity; the methodology for calculating income taxes in an interim period; and the recognition of deferred tax liabilities for outside basis differences. On January 1, 2020, the Company early adopted ASU 2019-12 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

12. Warrants

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

	Warrants as of
			Weighted- Average Exercise			Balance Sheet Classification
	June 30, 2020	December 31, 2019	Price Per Share		Expiration	June 30, 2020	December 31, 2019
Warrants to purchase common stock	39	39	$	5.88	July 9, 2020	Liability	Liability

All remaining outstanding warrants were automatically cashless exercised in full upon their expiration on July 9, 2020.

13. Commitments and Contingencies

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three months ended June 30, 2020, and, to the best of its knowledge, no material legal proceedings are currently pending or threatened.

Other

The Company is also party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met at June 30, 2020 and December 31, 2019, or royalties on future sales of specified products. See Note 14 for discussion of these arrangements. 

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is

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unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

14. Significant Agreements

BMS (Bristol Myers Squibb Company)

Overview

On February 20, 2008, the Company entered into an agreement with Celgene, which was acquired by BMS in November 2019 and is now referred to herein as BMS, relating to sotatercept (the Original Sotatercept Agreement), which was amended on August 2, 2011 (as amended, the Amended Sotatercept Agreement). The Company further amended and restated the Original Sotatercept Agreement in its entirety on September 18, 2017 (the Restated Sotatercept Agreement) and clarified certain responsibilities of the Company and BMS in a letter agreement to the Restated Sotatercept Agreement on March 10, 2020. On August 2, 2011, the Company entered into a second agreement with BMS for REBLOZYL® (luspatercept-aamt) (the REBLOZYL Agreement, formerly the Luspatercept Agreement).

Since December 31, 2019, there have been no material changes to the key terms of the above agreements. For further information on the terms of the agreements, please see the notes to the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2019.

Accounting Analysis

Upon adoption of ASC 606, all of the Company’s performance obligations pursuant to its arrangements with BMS were completed and all remaining potential milestone payments were fully constrained as they relate to future regulatory events that are outside of the Company’s control, and therefore the risk of significant reversal in the amount of cumulative revenue had not been resolved. As of June 30, 2020, the final regulatory milestone payment for REBLOZYL would be $20.0 million and would result from approval by a regulatory authority in Asia (as defined in the REBLOZYL Agreement) of a Biologics License Application (BLA) or equivalent for luspatercept-aamt in either myelodysplastic syndromes or beta-thalassemia. In accordance with the Company's accounting policy regarding revenue recognition as described in Note 2 to its Annual Report on Form 10-K, the revenue associated with this milestone will be recognized once it is probable that the application is approved by the regulatory authority. Milestone payments that are not within the control of the Company or the licensee are not considered probable of being achieved until those approvals are received. The approval of the application is not within the control of the Company or the licensee, and therefore, as of June 30, 2020, the Company cannot determine if it is probable that a regulatory agency will approve the applications.

In June 2020, the European Commission, which has the authority to approve medicines for the European Union, approved REBLOZYL based on the recommendation of the European Medicines Agency, or EMA, for the treatment of adult patients with transfusion-dependent anemia due to very low-, low- and intermediate-risk MDS with ring sideroblasts, who had an unsatisfactory response or are ineligible for erythropoietin-based therapy, and adult patients with transfusion-dependent anemia associated with beta-thalassemia. As a result, the $25.0 million milestone from European Medicines Agency (EMA) approval of a Biologics Licensing Application (BLA) or equivalent for REBLOZYL is no longer constrained. As the Company does not have any remaining performance obligations under the agreement with BMS, the full $25.0 million was recognized as revenue during the three months ended June 30, 2020.

Through June 30, 2020, under all BMS arrangements, the Company has received net cost-share payments, milestones, and royalties of $219.6 million and $44.9 million for REBLOZYL and sotatercept, respectively. The Company recorded net collaboration revenue of $39.8 million and $27.7 million during the three months ended June 30, 2020 and 2019, respectively, and $44.1 million and $30.4 million during the six months ended June 30, 2020 and 2019, respectively.

Other Agreements

In 2004, the Company entered into a license agreement with a non-profit institution for an exclusive, sublicensable, worldwide, royalty-bearing license to certain patents developed by the institution (Primary Licensed Products). In addition, the Company was granted a non-exclusive, non-sub-licensable license for Secondary Licensed Products. The Company also agreed to pay specified development milestone payments totaling up to $2.0 million for sotatercept and $0.7 million for REBLOZYL. In addition, the Company is obligated to pay milestone fees based on the Company’s research and development progress, and U.S. sublicensing revenue ranging from 10%-25%, as well as royalties ranging from 1.0%-3.5% of net sales on any products under the licenses. During the three months ended June 30, 2020 and 2019, the Company expensed $2.1 million and $1.6 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $2.4 million and $1.6

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million, respectively, of milestones, fees and royalties. Milestones and fees associated with development related activities are recorded as research and development expense. Costs related to royalties on sales of commercial products are recorded as selling, general and administrative expense.

In May 2014, the Company executed a collaboration agreement with a research technology company, and such collaboration agreement was amended and restated in March 2019. The Company paid an upfront research fee of $0.3 million upon execution of the original agreement. The Company also received an option to obtain a commercial license to the molecules developed during the collaboration. During the three months ended June 30, 2020 and 2019, the Company expensed $0.5 million and $1.7 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $0.5 million and $1.9 million, respectively, of milestones and fees, which is recorded as research and development expense.

In December 2019, the Company executed a license and collaboration agreement with Fulcrum Therapeutics to identify small molecules designed to modulate specific pathways associated with a targeted indication within the pulmonary disease space. The Company paid an upfront research fee of $10.0 million upon execution of this agreement, which was expensed to research and development. The Company also agreed to pay specified research, development and commercial milestone payments of up to $295.0 million for a first product commercialized and up to a maximum of $143.5 million in additional milestone payments for all subsequent products commercialized. Fulcrum will additionally receive tiered royalty payments in the mid-single-digit to low double-digit range on net sales, as well as reimbursement for relevant research and development costs. During the three months ended June 30, 2020 and 2019, the Company expensed $0.8 million and zero, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $1.1 million and zero, respectively, of milestones and fees, which is recorded as research and development expense.

15. Stock-Based Compensation

The Company recognized stock-based compensation expense related to the 2003 Stock Option and Restricted Stock Plan (the 2003 Plan), the 2013 Equity Incentive Plan (the 2013 Plan), and the 2013 Employee Stock Purchase Plan (the 2013 ESPP) in the consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2020 and 2019, respectively, as follows (in thousands):

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Research and development	$	3,259	$	2,006	$	6,400	$	5,505
Selling, general and administrative	3,881		3,006		7,419		6,499
	$	7,140	$	5,012	$	13,819	$	12,004

Stock Options

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

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Expected volatility	57.9	%	58.3	%	55.4	%	59.0	%
Expected term (in years)	6.0		6.0		6.0		6.0
Risk-free interest rate	0.4	%	2.2	%	1.5	%	2.6	%
Expected dividend yield	—	%	—	%	—	%	—	%

The following table summarizes the stock option activity under the Company’s stock option plans during the six months ended June 30, 2020 (in thousands, except per share amounts and years):

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	Number of Stock Options	Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life (in years)	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2019	3,820	$	36.26	6.81
Granted	926	$	58.36
Exercised	(913)	$	30.77
Canceled or forfeited	(153)	$	42.20
Outstanding at June 30, 2020	3,680	$	42.94	7.48	$	192,690
Exercisable at June 30, 2020	1,882	$	36.53	6.18	$	110,552

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at June 30, 2020.

The aggregate intrinsic value of options exercised during the six months ended June 30, 2020 was $53.5 million. 

As of June 30, 2020, there was $43.7 million of unrecognized compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of 2.72 years. 

Restricted Stock Units

The following table summarizes the restricted stock unit (RSU) activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	397	$	39.20
Granted	214	57.25
Vested	(123)	37.76
Forfeited	(31)	42.57
Unvested balance at June 30, 2020	457	$	47.80

As of June 30, 2020, there was approximately $17.4 million of related unrecognized compensation cost, which the Company expects to recognize over a remaining weighted-average period of 1.90 years.

Performance-Based Restricted Stock Units

On January 22, 2020, the Company granted performance-based restricted stock units (PSU) whereby vesting depends upon the occurrence of certain milestone events by December 31, 2022. As of June 30, 2020, none of the PSU milestones had been achieved. When achievement of a milestone becomes probable, compensation cost will be recognized from the grant date over the requisite service period. As of June 30, 2020, no related compensation cost had been recognized. The following table summarizes PSU activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	—	$	—
Granted (1)	78	52.99
Vested	—	—
Forfeited	(3)	52.99
Unvested balance at June 30, 2020	75	$	52.99

(1)Pursuant to the terms of the awards granted on January 22, 2020, the actual number of awards earned could range between 0% and 200% of the number of awards granted.

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As of June 30, 2020, there was approximately $4.0 million of related unrecognized compensation cost. Depending on the actual number of awards earned, the actual expense recognized could range between 0% and 200% of this amount.

16. Income Taxes

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. 

17. Related Party Transactions

BMS

BMS owned 11.8% and 12.0% of the Company’s fully diluted equity as of June 30, 2020 and December 31, 2019, respectively. Refer to Note 14 for additional information regarding this collaboration arrangement.

During the three and six months ended June 30, 2020 and 2019, all revenue recognized by the Company was recognized under the BMS collaboration arrangement.

18. Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure except as described below.

On July 6, 2020, the Company completed the sale in an underwritten public offering of 5,594,593 shares of common stock, including 729,729 shares of common stock sold pursuant to the underwriter's full exercise of their option to purchase additional shares, at a public offering price of $92.50 per share, resulting in net proceeds to the Company of $492.5 million.

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

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019.

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

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

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

•our ongoing and planned preclinical studies and clinical trials;

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

•our plans to develop and commercialize sotatercept in pulmonary hypertension and our other potential therapeutic candidates;

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

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

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

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

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

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

•our manufacturing capabilities and strategy;

•our plans for commercialization and marketing;

•our intellectual property position; and 

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

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

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

You should also read carefully the factors described in the section “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

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You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, press releases, and our website.

Overview

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

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

Hematology

Our first commercial product, REBLOZYL® (luspatercept-aamt), is a first-in-class erythroid maturation agent designed to promote red blood cell, or RBC, production through a novel mechanism, and is partnered with BMS (which acquired Celgene Corporation, or Celgene, in 2019). In November 2019, the U.S. Food and Drug Administration, or FDA, approved REBLOZYL for the treatment of anemia in adult patients with beta-thalassemia who require regular RBC transfusions. In April 2020, the FDA also approved REBLOZYL for the treatment of anemia failing an erythropoiesis stimulating agent and requiring two or more RBC units per eight weeks in adult patients with very low- to intermediate-risk myelodysplastic syndromes, or MDS, with ring sideroblasts or with a myelodysplastic/myeloproliferative neoplasm with ring sideroblasts and thrombocytosis. In June 2020, the European Commission, which has the authority to approve medicines for the European Union, approved REBLOZYL based on the recommendation of the European Medicines Agency, or EMA, for the treatment of adult patients with transfusion-dependent anemia due to very low-, low- and intermediate-risk MDS with ring sideroblasts, who had an unsatisfactory response or are ineligible for erythropoietin-based therapy, and adult patients with transfusion-dependent anemia associated with beta-thalassemia.

BMS is currently conducting a Phase 2 clinical trial with luspatercept-aamt in non-transfusion-dependent beta-thalassemia patients, referred to as the BEYOND trial, with topline results currently expected by the end of 2020 or early 2021, and a Phase 3 clinical trial, the COMMANDS trial, in first-line, lower-risk MDS patients, with topline results expected in or after 2022. In myelofibrosis, BMS is conducting a Phase 2 clinical trial in patients with myelofibrosis-associated anemia, and initial results from this trial were presented in December 2019 at the 61st American Society of Hematology Annual Meeting and Exposition showing that luspatercept-aamt improved anemia in patients receiving and not receiving RBC transfusions, with more profound effects in patients treated with ruxolitinib, a small molecule JAK inhibitor. Based on these data, we and BMS announced plans to initiate by the end of 2020 or early 2021 the Phase 3 INDEPENDENCE study in patients with myelofibrosis-associated anemia who are being treated with JAK inhibitor therapy and require RBC transfusions.

We believe that there is an annual peak sales opportunity for REBLOZYL in excess of $2 billion in lower-risk MDS and beta-thalassemia, and upon successful development and approval in the United States and Europe, an additional $1 billion in myelofibrosis and other future development opportunities. We and BMS are evaluating luspatercept-aamt for the treatment of anemia in potential new indications that could provide additional sales opportunities.

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

Pulmonary

We are actively developing our lead pulmonary program, sotatercept, for the treatment of patients with pulmonary arterial hypertension, or PAH. Sotatercept is generally partnered with BMS, but we retain the exclusive rights to fund, develop, and lead the global commercialization of sotatercept in pulmonary hypertension, which we refer to as the PH field, and that includes PAH. PAH is a rare and chronic, rapidly progressing disorder characterized by the constriction of small pulmonary arteries, resulting in abnormally high blood pressure in the pulmonary arteries.

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In June 2020, we presented topline results of the PULSAR Phase 2 trial of sotatercept in patients with PAH on stable background PAH-specific therapies during the "Breaking News: Clinical Trials in Pulmonary Medicine" session of the American Thoracic Society, or ATS, 2020 Virtual Conference. Study investigators reported that the trial met its primary endpoint, pulmonary vascular resistance, and its key secondary endpoint, six-minute walk distance, and showed concordance of results across multiple additional endpoints and regardless of baseline characteristics. Sotatercept was generally well tolerated in the trial and adverse events observed in the study were generally consistent with previously published data on sotatercept in clinical trials in other patient populations. The 18-month extension period of the PULSAR trial is ongoing.

We are currently enrolling an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH, with preliminary results expected in the first half of 2021. We also recently announced that the FDA has granted Breakthrough Therapy designation to sotatercept for the treatment of patients with PAH, and that the EMA has granted Priority Medicines, or PRIME, designation to sotatercept for the treatment of patients with PAH.

If sotatercept is commercialized to treat PAH and we recognize such revenue, then we will owe BMS a royalty in the low 20% range on global net sales. In certain circumstances, BMS may recognize revenue related to the commercialization of sotatercept in PAH, and in this scenario we will be eligible to receive a royalty from BMS such that the economic position of the parties is equivalent to the scenario in which we recognize such revenue.

Funding and Expense

As of June 30, 2020, our operations have been primarily funded by $105.1 million in equity investments from venture investors, $773.8 million from public investors, $154.1 million in equity investments from our collaboration partners and $394.6 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners. On July 6, 2020, we completed the sale in an underwritten public offering of 5,594,593 shares of common stock, including 729,729 shares of common stock sold pursuant to the underwriter's full exercise of their option to purchase additional shares, at a public offering price of $92.50 per share, resulting in net proceeds to us of $492.5 million.

We expect our expenses will increase substantially in connection with our ongoing activities, if and as we:

•conduct clinical trials for sotatercept in the PH field or any future therapeutic candidates;

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

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

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

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

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

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

•seek regulatory approval for our therapeutic candidates; and

•attract and retain skilled personnel.

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

To date, we have only generated limited revenue from royalties on the sale of REBLOZYL since receiving our first regulatory approval from the FDA in November 2019. Our ability to generate product revenue and become profitable depends upon our and our partners’ ability to successfully commercialize products. We expect our losses to increase as we continue our development of, and seek regulatory approvals for, our therapeutic candidates and potentially begin to commercialize any additional approved products. For a description of the numerous risks and uncertainties associated with product development,

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see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Financial Operations Overview 

Impact of COVID-19 on our Business

A novel strain of coronavirus (COVID-19) was declared a global pandemic by the World Health Organization (WHO) in March 2020 and has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. As of June 30, 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 with regard to timelines to complete patient enrollment in our ongoing clinical trials, and commercialization efforts for REBLOZYL with regard to customer engagement and in-person promotion. In addition, as various geographies in the United States and worldwide reopen and then shut down due to surging COVID-19 infections, we may experience additional setbacks to our operations that could have a material impact on our business.

For a discussion of the risks presented by the COVID-19 pandemic to our results, see Risk Factors in Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

Revenue

Collaboration Revenue

Our revenue to date has been predominantly derived from collaboration revenue, which includes license and milestone revenue, cost-sharing revenue, and royalties, generated through collaboration and license agreements with partners for the development and commercialization of our therapeutic candidates. Cost-sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and co-promotion activities under our collaboration agreements. Cost-sharing revenue is recognized in the period that the related activities are performed. We recognize revenue from royalties when the related sales occur.

Costs and Expenses

Research and Development Expenses

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

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

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

•the cost of acquiring and manufacturing preclinical and clinical study materials and developing manufacturing processes;

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

•expenses associated with obtaining and maintaining patents; and

•costs associated with preclinical activities and regulatory compliance.

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

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

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

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•future clinical trial results;

•potential changes in government regulation; and

•the timing and receipt of any regulatory approvals.

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

From inception through June 30, 2020, we have incurred $888.6 million in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue the development of our TGF-beta platform therapeutic candidates, the discovery and development of preclinical therapeutic candidates, and the development of our clinical programs. Research and development expenses associated with luspatercept-aamt, and, outside of the PH field, sotatercept, are generally reimbursed 100% by BMS. These reimbursements are recorded as revenue. We are expensing the costs of Phase 2 clinical trials for luspatercept-aamt, sotatercept, and ACE-083, of which the luspatercept-aamt trials are reimbursed by BMS. Our Phase 2 clinical trials for ACE-083 are being discontinued. With respect to the luspatercept-aamt clinical trials directly conducted by BMS, we do not incur and are not reimbursed for expenses related to these development activities.

We manage certain activities such as clinical trial operations, manufacture of therapeutic candidates, and preclinical animal toxicology studies through third-party CROs. The only costs we track by each therapeutic candidate are external costs such as services provided to us by CROs, manufacturing of preclinical and clinical drug product, and other outsourced research and development expenses. We do not assign or allocate to individual development programs internal costs such as salaries and benefits, facilities costs, lab supplies and the costs of preclinical research and studies, except for luspatercept-aamt costs for the purposes of billing BMS. Our external research and development expenses during the three and six months ended June 30, 2020 and 2019 are as follows:

	Three Months Ended    June 30,				Six Months Ended    June 30,
(in thousands)	2020		2019		2020		2019
Luspatercept-aamt(1)	$	927	$	921	$	1,346	$	2,260
Sotatercept(2)	8,744		3,915		17,724		8,138
ACE-083(3)	2,338		6,117		6,524		10,550
Total direct research and development expenses	12,009		10,953		25,594		20,948
Other expenses(4)	26,242		23,812		50,323		46,588
Total research and development expenses	$	38,251	$	34,765	$	75,917	$	67,536

(1)These expenses associated with luspatercept-aamt are reimbursed 100% by BMS.

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

(3)Development of ACE-083 is being discontinued. We expect to incur all remaining material expense by the end of 2020.

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

Selling, General and Administrative Expenses

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

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

Other Income (Expense), Net

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

To estimate the fair value of our liability classified warrants, we use either the Monte Carlo simulation framework, which incorporates future financing events over the remaining life of the warrants to purchase common stock, or for certain re-measurement dates, due to the warrants being deeply in the money, the Black-Scholes option pricing model. We base the estimates in the pricing models, in part, on subjective assumptions, including stock price volatility, risk-free interest rate, dividend yield, and the fair value of the common stock underlying the warrants. The Black-Scholes option pricing model was used at June 30, 2020.

Critical Accounting Policies and Estimates 

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

During the three and six months ended June 30, 2020, there have been no material changes to our critical accounting policies as reported in our Annual Report on the Form 10-K for the year ended December 31, 2019. For further information on our critical and other significant accounting policies, including the adoption of ASC 326, see the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019. 

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Results of Operations 

Comparison of the Three Months Ended June 30, 2020 and 2019

	Three Months Ended    June 30,				Increase
(in thousands)	2020		2019		(Decrease)
Revenue:
Collaboration revenue:
Milestone	$	25,000	$	25,000	$	—
Cost-sharing, net	3,678		2,666		1,012
Royalty	11,074		—		11,074
Total revenue (all amounts are with a related party)	39,752		27,666		12,086
Costs and expenses:
Research and development	38,251		34,765		3,486
Selling, general and administrative	20,414		14,037		6,377
Total costs and expenses	58,665		48,802		9,863
Loss from operations	(18,913)		(21,136)		2,223
Other income, net	466		3,230		(2,764)
Loss before income taxes	(18,447)		(17,906)		(541)
Income tax (provision) benefit	(4)		44		(48)
Net loss	$	(18,451)	$	(17,862)	$	(589)

Revenue.  We recognized revenue of $39.8 million in the three months ended June 30, 2020, compared to $27.7 million in the same period in 2019. All of the revenue in both periods was derived from the BMS agreements. This $12.1 million increase is primarily related to royalty revenue from REBLOZYL sales recognized in 2020.

Research and Development Expenses.  Research and development expenses were $38.3 million in the three months ended June 30, 2020, compared to $34.8 million in the same period in 2019. This $3.5 million increase is primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:

•an increase in personnel and facilities-related expense of $2.4 million related to increased headcount to support our growth;

•an increase in contract manufacturing, drug supply, and toxicology of $4.3 million related to our ongoing clinical and preclinical programs; and

•an increase in miscellaneous research expense of $0.9 million; offset by

•a decrease in external clinical trial expense of $4.2 million due to the discontinuation of our ACE-083 program and wind down of our luspatercept-aamt clinical programs and transfer to BMS.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $20.4 million in the three months ended June 30, 2020, compared to $14.0 million in the same period in 2019. The $6.4 million increase is primarily due to the following factors:

•an increase in personnel expense and facilities-related expense of $4.6 million related to increased headcount to support our growth; and

•an increase in selling expense of $1.8 million to continue supporting the launch of REBLOZYL, our first commercial product, which was approved for its second indication by the FDA in April 2020, as well as market research and market development activities for sotatercept.

Other Income, Net.  Other income, net was $0.5 million in the three months ended June 30, 2020, compared to $3.2 million for the same period in 2019. This $2.7 million decrease was primarily due to a $0.4 million decrease in the expense associated with marking the common warrant liability to market and a $2.3 million decrease in the interest earned on our investment portfolio as a result of a decrease in interest rates.

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Income Tax Provision. Income tax provision is attributable to the realization of current year losses that offset unrealized gains from our investment portfolio.

Comparison of the Six Months Ended June 30, 2020 and 2019

	Six Months Ended    June 30,				Increase
(in thousands)	2020		2019		(Decrease)
Revenue:
Collaboration revenue:
Milestone	$	25,000	$	25,000	$	—
Cost-sharing, net	6,502		5,447		1,055
Royalty	12,594		—		12,594
Total revenue (all amounts are with a related party)	44,096		30,447		13,649
Costs and expenses:
Research and development	75,917		67,536		8,381
Selling, general and administrative	38,663		24,851		13,812
Total costs and expenses	114,580		92,387		22,193
Loss from operations	(70,484)		(61,940)		(8,544)
Other income, net	1,113		6,003		(4,890)
Loss before income taxes	(69,371)		(55,937)		(13,434)
Income tax (provision) benefit	(20)		24		(44)
Net loss	$	(69,391)	$	(55,913)	$	(13,478)

Revenue.  We recognized revenue of $44.1 million in the six months ended June 30, 2020, compared to $30.4 million in the same period in 2019. All of the revenue in both periods was derived from the BMS agreements. This $13.7 million increase is primarily related to royalty revenue from REBLOZYL sales recognized in 2020.

Research and Development Expenses.  Research and development expenses were $75.9 million in the six months ended June 30, 2020, compared to $67.5 million in the same period in 2019. This $8.4 million increase is primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:

•an increase in personnel and facilities-related expense of $4.0 million related to increased headcount to support our growth;

•an increase in contract manufacturing, drug supply and toxicology expenses of $10.8 million related to our ongoing clinical and preclinical programs; and

•an increase in miscellaneous research expense of $1.3 million; offset by

•a decrease in external clinical trial expense of $7.7 million due to the discontinuation of our ACE-083 program and wind down of our luspatercept-aamt clinical programs and transfer to BMS.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $38.7 million in the six months ended June 30, 2020, compared to $24.9 million in the same period in 2019. The $13.8 million increase is primarily due to the following factors:

•an increase in personnel expense and facilities-related expense of $9.8 million related to increased headcount to support our growth;

•an increase in selling expense of $3.4 million to continue supporting the launch of REBLOZYL, our first commercial product, which was approved for its second indication by the FDA in April 2020, as well as market research and market development activities for sotatercept; and

•an increase in other miscellaneous expenses of $0.6 million.

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Other Income, Net.  Other income, net was $1.1 million in the six months ended June 30, 2020, compared to $6.0 million for the same period in 2019. This $4.9 million decrease was primarily due to a $1.8 million decrease in the expense associated with marking the common warrant liability to market and a $3.1 million decrease in the interest earned on our investment portfolio as a result of a decrease in interest rates.

Income Tax Provision. Income tax provision is attributable to the realization of current year losses that offset unrealized gains from our investment portfolio.

Liquidity and Capital Resources

We have incurred losses and cumulative negative cash flows from operations since our inception in June 2003, and as of June 30, 2020, we had an accumulated deficit of $780.8 million. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we may need additional capital to fund our operations, which we may raise through a combination of the sale of equity, debt financings or other sources, including potential additional collaborations.

As of June 30, 2020, our operations have been primarily funded by $105.1 million in equity investments from venture investors, $773.8 million from public investors, $154.1 million in equity investments from our collaboration partners, and $394.6 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners.

On July 6, 2020, we completed the sale in an underwritten public offering of 5,594,593 shares of common stock, including 729,729 shares of common stock sold pursuant to the underwriter's full exercise of their option to purchase additional shares, at a public offering price of $92.50 per share, resulting in net proceeds to us of $492.5 million.

As of June 30, 2020, we had $389.8 million in cash, cash equivalents and investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Cash Flows

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

	Six Months Ended June 30,
(in thousands)	2020		2019
Net cash (used in) provided by:
Operating activities	$	(89,401)	$	(40,508)
Investing activities	107,426		(190,985)
Financing activities	27,819		251,050
Net increase in cash, cash equivalents and restricted cash	$	45,844	$	19,557

Operating Activities 

Net cash used in operating activities was $89.4 million for the six months ended June 30, 2020, compared to $40.5 million during the same period in 2019. Significant factors in this $48.9 million increase include:

•an increase in net loss of $13.5 million due to an increase in operating expenses related to increased headcount and facilities, external expenses for contract manufacturing, consulting, and other external expenses to support our wholly-owned therapeutic programs, as well as expenses for commercial activities for REBLOZYL, offset by an increase in royalty revenue associated with sales of REBLOZYL;

•a net increase in operating assets and liabilities of $38.4 million, consisting primarily of an increase in collaboration receivables of $32.8 million and an increase in accrued expenses of $5.3 million; and

•a net increase in other non-cash expenses of $3.0 million largely related to an increase in stock-based compensation expense and fair value of the common stock warrants.

Investing Activities

Net cash provided by investing activities was $107.4 million for the six months ended June 30, 2020, compared to net cash used in investing activities of $191.0 million during the same period in 2019. Net cash provided by and used in investing activities primarily consisted of the following amounts relating to activity within our investment portfolio:

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

•for the six months ended June 30, 2019, net purchases of investments of $189.7 million due to the execution of our investment strategy in accordance with our policy as we began to invest the money raised in our January 2019 public offering in marketable securities.

Financing Activities

Net cash provided by financing activities was $27.8 million for the six months ended June 30, 2020, compared to $251.1 million during the same period in 2019. Net cash provided by financing activities consisted primarily of the following:

•for the six months ended June 30, 2020, $27.8 million in cash proceeds from the exercise of stock options and the issuance of common stock related to the employee stock purchase plan; and

•for the six months ended June 30, 2019, $248.1 million from our January 2019 public offering and the underwriters full exercise of the over-allotment option in the offering, as well as $2.9 million in cash proceeds from the exercise of stock options and the issuance of common stock related to the employee stock purchase plan.

Operating Capital Requirements

To date, we have only generated limited revenue from royalties on the sale of our first and only commercial product, REBLOZYL, since receiving our first regulatory approval from the FDA in November 2019. We anticipate that our expenses will increase as we continue the development of, and seek and obtain regulatory approvals for, sotatercept in the PH field and any future therapeutic candidates, and begin to commercialize any approved products. We are subject to all of the risks inherent in the development of therapeutic candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Based on our current operating plan and projections, we believe that our current cash, cash equivalents and investments, together with the net proceeds from our July 2020 public offering and expected royalty revenue from REBLOZYL sales, will be sufficient to fund our projected operating requirements for the foreseeable future.

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

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

•the achievement of milestones under our agreement with BMS;

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

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

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

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

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

•the outcome, timing and cost of regulatory approvals;

•delays that may be caused by changing regulatory requirements;

•the cost and timing of hiring new employees to support our continued growth;

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

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

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

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

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

Net Operating Loss (NOL) Carryforwards 

We had net deferred tax assets of approximately $226.0 million as of December 31, 2019, which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily composed of federal and state tax net operating loss, or NOL, carryforwards, research and development tax credit carryforwards, and deferred revenue, accruals, and other temporary differences. As of December 31, 2019, we had federal NOL carryforwards of approximately $666.3 million and state NOL carryforwards of $689.8 million available to reduce future taxable income, if any.  Of these federal and state NOL carryforwards, $438.0 million and $689.4 million, respectively, will expire at various times through 2039. The federal NOL of $228.3 million and state NOL of $0.4 million generated beginning in 2018 can be carried forward indefinitely. In general, if we experience a greater than 50 percent aggregate change in ownership of certain significant stockholders over a three-year period, or a Section 382 ownership change, utilization of our pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state laws. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial. If we experience a Section 382 ownership change in connection with our public offerings or as a result of future changes in our stock ownership, some of which changes are outside our control, the tax benefits related to the NOL carryforwards may be limited or lost. For additional information about our taxes, see Note 13 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

Contractual Obligations and Commitments 

During the three months ended June 30, 2020, there were no material changes to our contractual obligations and commitments described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Recent Accounting Pronouncements in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements 

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

Item 3. Quantitative and Qualitative Disclosures About Market Risks

We are exposed to market risk related to changes in interest rates. As of June 30, 2020 and December 31, 2019, we had cash, cash equivalents and investments of $389.8 million and $453.8 million, respectively. Our cash equivalents are invested primarily in bank deposits and money market mutual funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. Due to the duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate 100 basis point change in interest rates would have a material effect on the fair market value of our portfolio. We have the ability to hold our investments until maturity, and therefore we would not expect our

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operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

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

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

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

As of June 30, 2020, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, the design and operation of our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

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SIGNATURES 

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

	ACCELERON PHARMA INC.
Date: August 6, 2020	By:	/s/ HABIB J. DABLE
		Habib J. Dable
		Chief Executive Officer and President
Date: August 6, 2020	By:	/s/ KEVIN F. MCLAUGHLIN
		Kevin F. McLaughlin
		Senior Vice President, Chief Financial Officer and Treasurer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER, ACCELERON PHARMA INC.

I, Habib J. Dable, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acceleron Pharma Inc.;

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

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

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

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

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

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

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

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

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

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

August 6, 2020	/s/ Habib J. Dable
Date	Habib J. Dable Chief Executive Officer and President (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER, ACCELERON PHARMA INC.

I, Kevin F. McLaughlin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Acceleron Pharma Inc.;

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

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

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

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

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

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

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

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

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

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

August 6, 2020	/s/ Kevin F. McLaughlin
Date	Kevin F. McLaughlin Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Acceleron Pharma Inc. (the “Company”) for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his or her knowledge:

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

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

Date: August 6, 2020	By:	/s/ Habib J. Dable
		Habib J. Dable President and Chief Executive Officer (Principal Executive Officer)
Date: August 6, 2020	By:	/s/ Kevin F. McLaughlin
		Kevin F. McLaughlin Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

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Cover Page - shares	6 Months Ended
	Jun. 30, 2020	Jul. 31, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	001-36065
Entity Registrant Name	ACCELERON PHARMA INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-0072226
Entity Address, Address Line One	128 Sidney Street
Entity Address, City or Town	Cambridge
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02139
City Area Code	617
Local Phone Number	649-9200
Title of 12(b) Security	Common Stock, $0.001 per share
Trading Symbol	XLRN
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		59,896,848
Entity Central Index Key	0001280600
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 283,521	$ 237,677
Collaboration receivables (all amounts are with a related party)	39,752	8,547
Prepaid expenses and other current assets	19,388	10,000
Short-term investments	106,289	193,692
Total current assets	448,950	449,916
Property and equipment, net	7,671	6,812
Operating lease - right of use asset, net	21,116	23,908
Other assets	1,698	1,793
Long-term investments	0	22,477
Total assets	479,435	504,906
Current liabilities:
Accounts payable	12,927	2,295
Accrued expenses	17,966	24,895
Operating lease liability - right of use	6,467	6,183
Total current liabilities	37,360	33,373
Operating lease liability - right of use, net of current portion	16,940	20,201
Warrants to purchase common stock	3,516	1,856
Total liabilities	57,816	55,430
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value: 175,000,000 shares authorized; 54,166,712 and 53,123,567 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	54	53
Additional paid-in capital	1,202,445	1,160,807
Accumulated deficit	(780,797)	(711,407)
Accumulated other comprehensive (loss) income	(83)	23
Total stockholders’ equity	421,619	449,476
Total liabilities and stockholders’ equity	$ 479,435	$ 504,906

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in usd per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	175,000,000	175,000,000
Common stock, shares issued (in shares)	54,166,712	53,123,567
Common stock, shares outstanding (in shares)	54,166,712	53,123,567

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Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Collaboration revenue:
Revenues	$ 39,752	$ 27,666	$ 44,096	$ 30,447
Costs and expenses:
Research and development	38,251	34,765	75,917	67,536
Selling, general and administrative	20,414	14,037	38,663	24,851
Total costs and expenses	58,665	48,802	114,580	92,387
Loss from operations	(18,913)	(21,136)	(70,484)	(61,940)
Other income, net	466	3,230	1,113	6,003
Loss before income taxes	(18,447)	(17,906)	(69,371)	(55,937)
Income tax (provision) benefit	(4)	44	(20)	24
Net loss	(18,451)	(17,862)	(69,391)	(55,913)
Other comprehensive (loss) income:
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax	161	452	(106)	721
Comprehensive loss	$ (18,290)	$ (17,410)	$ (69,497)	$ (55,192)
Net loss per share- basic and diluted (in dollars per share)	$ (0.34)	$ (0.34)	$ (1.29)	$ (1.08)
Weighted-average number of common shares used in computing net loss per share- basic and diluted (in shares)	53,860	52,689	53,610	51,912
Milestone
Collaboration revenue:
Revenues	$ 25,000	$ 25,000	$ 25,000	$ 25,000
Cost-sharing, net
Collaboration revenue:
Revenues	3,678	2,666	6,502	5,447
Royalty
Collaboration revenue:
Revenues	$ 11,074	$ 0	$ 12,594	$ 0

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Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Comprehensive Income (Loss)
Stockholders' equity beginning balance (in shares) at Dec. 31, 2018		46,260,747
Stockholders' equity beginning balance at Dec. 31, 2018	$ 292,037	$ 47	$ 879,099	$ (586,549)	$ (560)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	6,992		6,992
Issuance of common stock, net of expense (in shares)		6,151,163
Issuance of common stock, net of expense	248,130	$ 6	248,124
Exercise of stock options (in shares)		35,919
Exercise of stock options	766		766
Vesting of restricted stock units, net of shares withheld for taxes (in shares)		75,028
Vesting of restricted stock units, net of shares withheld for taxes	(393)		(393)
Issuance of common stock related to ESPP (in shares)		19,661
Issuance of common stock related to ESPP	788		788
Unrealized loss on available-for-sale securities, net of tax	268				268
Net loss	(38,053)			(38,053)
Stockholders' equity ending balance (in shares) at Mar. 31, 2019		52,542,518
Stockholders' equity ending balance at Mar. 31, 2019	510,535	$ 53	1,135,376	(624,602)	(292)
Stockholders' equity beginning balance (in shares) at Dec. 31, 2018		46,260,747
Stockholders' equity beginning balance at Dec. 31, 2018	292,037	$ 47	879,099	(586,549)	(560)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unrealized loss on available-for-sale securities, net of tax	721
Net loss	(55,913)
Stockholders' equity ending balance (in shares) at Jun. 30, 2019		52,752,854
Stockholders' equity ending balance at Jun. 30, 2019	$ 499,897	$ 53	1,142,148	(642,464)	160
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, par value (in usd per share)	$ 0.001
Stockholders' equity beginning balance (in shares) at Mar. 31, 2019		52,542,518
Stockholders' equity beginning balance at Mar. 31, 2019	$ 510,535	$ 53	1,135,376	(624,602)	(292)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	5,012		5,012
Exercise of stock options (in shares)		64,174
Exercise of stock options	1,760		1,760
Vesting of restricted stock units, net of shares withheld for taxes (in shares)		146,162
Unrealized loss on available-for-sale securities, net of tax	452				452
Net loss	(17,862)			(17,862)
Stockholders' equity ending balance (in shares) at Jun. 30, 2019		52,752,854
Stockholders' equity ending balance at Jun. 30, 2019	$ 499,897	$ 53	1,142,148	(642,464)	160
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, par value (in usd per share)	$ 0.001
Common stock, par value (in usd per share)	$ 0.001
Stockholders' equity beginning balance (in shares) at Dec. 31, 2019		53,123,567
Stockholders' equity beginning balance at Dec. 31, 2019	$ 449,476	$ 53	1,160,807	(711,407)	23
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	6,679		6,679
Exercise of stock options (in shares)		295,757
Exercise of stock options	8,485		8,485
Vesting of restricted stock units, net of shares withheld for taxes (in shares)		77,949
Vesting of restricted stock units, net of shares withheld for taxes	(472)		(472)
Issuance of common stock related to ESPP (in shares)		22,647
Issuance of common stock related to ESPP	860		860
Unrealized loss on available-for-sale securities, net of tax	(267)				(267)
Net loss	(50,939)			(50,939)
Stockholders' equity ending balance (in shares) at Mar. 31, 2020		53,519,920
Stockholders' equity ending balance at Mar. 31, 2020	413,822	$ 53	1,176,359	(762,346)	(244)
Stockholders' equity beginning balance (in shares) at Dec. 31, 2019		53,123,567
Stockholders' equity beginning balance at Dec. 31, 2019	$ 449,476	$ 53	1,160,807	(711,407)	23
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	913,000
Unrealized loss on available-for-sale securities, net of tax	$ (106)
Net loss	(69,391)
Stockholders' equity ending balance (in shares) at Jun. 30, 2020		54,166,712
Stockholders' equity ending balance at Jun. 30, 2020	$ 421,619	$ 54	1,202,445	(780,797)	(83)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, par value (in usd per share)	$ 0.001
Stockholders' equity beginning balance (in shares) at Mar. 31, 2020		53,519,920
Stockholders' equity beginning balance at Mar. 31, 2020	$ 413,822	$ 53	1,176,359	(762,346)	(244)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	7,140		7,140
Exercise of stock options (in shares)		617,441
Exercise of stock options	19,610	$ 1	19,609
Vesting of restricted stock units, net of shares withheld for taxes (in shares)		29,351
Vesting of restricted stock units, net of shares withheld for taxes	(663)		(663)
Unrealized loss on available-for-sale securities, net of tax	161				161
Net loss	(18,451)			(18,451)
Stockholders' equity ending balance (in shares) at Jun. 30, 2020		54,166,712
Stockholders' equity ending balance at Jun. 30, 2020	$ 421,619	$ 54	$ 1,202,445	$ (780,797)	$ (83)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, par value (in usd per share)	$ 0.001

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Consolidated Statements of Stockholders' Equity (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares
Statement of Stockholders' Equity [Abstract]
Issuance costs | $	$ 500
Common stock, par value (in usd per share) | $ / shares	$ 0.001

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating Activities
Net loss	$ (69,391)	$ (55,913)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,938	1,942
Stock-based compensation	13,819	12,004
Other non-cash items	1,563	404
Changes in assets and liabilities:
Prepaid expenses and other assets	(9,293)	(2,508)
Collaboration receivables (all amounts are with a related party)	(31,205)	1,592
Non-cash lease expense	2,792	2,502
Accounts payable	10,334	3,129
Accrued expenses	(6,998)	(1,744)
Operating lease obligations	(2,977)	(1,874)
Other changes in operating assets and liabilities	17	(42)
Net cash used in operating activities	(89,401)	(40,508)
Investing Activities
Purchases of investments	(58,539)	(293,913)
Proceeds from sales and maturities of investments	168,385	104,201
Purchases of property and equipment	(2,420)	(1,273)
Net cash provided by (used in) investing activities	107,426	(190,985)
Financing Activities
Proceeds from issuance of common stock from public offering, net of issuance costs	0	248,130
Net proceeds from exercises and vesting of stock awards, ESPP contributions, and exercise of warrants to purchase common stock	27,819	2,920
Net cash provided by financing activities	27,819	251,050
Net increase in cash, cash equivalents and restricted cash	45,844	19,557
Cash, cash equivalents and restricted cash at beginning of period	239,274	145,649
Cash, cash equivalents and restricted cash at end of period	285,118	165,206
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	352	338
Capitalized follow-on public offering costs included in accrued expenses	$ 423	$ 0

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Nature of Business

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

Nature of Business

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

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

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

The accompanying interim condensed consolidated financial statements are unaudited and reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of June 30, 2020, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, have not changed, and the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2019. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019, and its cash flows for the six months ended June 30, 2020 and 2019. 

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

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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Use of Estimates

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Use of Estimates

Use of Estimates 

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

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these consolidated financial statements, management used significant estimates in the following areas, among others: accrued and prepaid clinical

expenses, contract manufacturing expense, stock-based compensation expense, revenue recognition and the recoverability of the Company's net deferred tax assets and related valuation allowance.

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Segment Information	6 Months Ended
	Jun. 30, 2020
Segment Reporting [Abstract]
Segment Information	Segment InformationOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one operating segment, which is the discovery, development, and commercialization of highly innovative therapeutics to treat serious and rare diseases.

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Cash Equivalents and Short-term and Long-term Investments

6 Months Ended

Jun. 30, 2020

Cash and Cash Equivalents [Abstract]

Cash Equivalents and Short-term and Long-term Investments

Cash Equivalents and Short-term and Long-term Investments

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

The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified all of its marketable securities at June 30, 2020 as “available-for-sale” pursuant to ASC 320, Investments – Debt and Equity Securities. Investments not classified as cash equivalents are presented as either short-term or long-term investments based on both their maturities as well as the time period the Company intends to hold such securities.

The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income. The cost of securities sold is based on the specific identification method. The Company includes in interest income interest and dividends on securities classified as available-for-sale.

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

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

The following is a summary of available-for-sale securities with unrealized losses as of June 30, 2020 (in thousands):

	Less than 12 months
	Fair Value		Unrealized Losses
Corporate obligations	21,330		(6)
U.S. government agency securities	49,984		(3)
Total available-for sale securities in an unrealized loss position	$	71,314	$	(9)

There were no securities in an unrealized loss for greater than 12 months as of June 30, 2020. The unrealized losses on the Company's available-for-sale securities were caused by central bank and market interest rate decreases on securities purchased at a premium. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company did not record an allowance for credit losses as of June 30, 2020.

Prior to January 1, 2020, the Company reviewed marketable securities for other-than-temporary impairment whenever the fair value of a marketable security was less than the amortized cost and evidence indicated that a marketable security’s carrying amount was not recoverable within a reasonable period of time. Other-than-temporary impairments of investments were recognized in the consolidated statements of operations if the Company had experienced a credit loss, had the intent to sell the

marketable security, or if it was more likely than not that the Company would be required to sell the marketable security before recovery of the amortized cost basis. Evidence considered in this assessment included reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.

The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2019 was $35.8 million. The aggregate fair value of securities held by the Company in an unrealized loss position for more than twelve months as of December 31, 2019 was zero. The aggregate unrealized loss for those securities in an unrealized loss position for more than twelve months was zero. The Company determined it did not hold any investments with any other-than-temporary impairment as of December 31, 2019.

The following is a summary of cash, cash equivalents and available-for-sale securities as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	283,522	$	—	$	(1)	$	283,521
Available-for-sale securities:
Corporate obligations	56,828		162		(6)		56,984
U.S. Treasury securities	49,026		33		(3)		49,056
Certificates of deposit	245		4		—		249
Total available-for-sale securities	$	106,099	$	199	$	(9)	$	106,289
Total cash, cash equivalents and available-for-sale securities	$	389,621	$	199	$	(10)	$	389,810

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	237,677	$	—	$	—	$	237,677
Available-for-sale securities:
Corporate obligations	124,676		219		(15)		124,880
U.S. Treasury securities	78,230		98		(1)		78,327
Certificates of deposit	490		3		—		493
Mortgage and other asset backed securities	12,476		5		(12)		12,469
Total available-for-sale securities	$	215,872	$	325	$	(28)	$	216,169
Total cash, cash equivalents and available-for-sale securities	$	453,549	$	325	$	(28)	$	453,846

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Restricted Cash

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Restricted Cash

Restricted Cash

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

	June 30,
	2020		2019
Cash and cash equivalents	$	283,521	$	163,609
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	285,118	$	165,206

As of June 30, 2020 and December 31, 2019, the Company maintained letters of credit totaling $1.6 million held in the form of certificates of deposit and money market funds as collateral for the Company's facility lease obligation and its credit cards.

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Concentrations of Credit Risk and Off-Balance Sheet Risk

6 Months Ended

Jun. 30, 2020

Risks and Uncertainties [Abstract]

Concentrations of Credit Risk and Off-Balance Sheet Risk

Concentrations of Credit Risk and Off-Balance Sheet Risk

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

The Company routinely assesses the creditworthiness of its collaboration partner. The Company has not experienced any material losses related to receivables from individual customers and collaboration partners, or groups of customers. The Company does not require collateral. Due to these factors, no allowance for credit losses has been recorded for the Company's collaboration receivables as of June 30, 2020.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input that is significant to each financial instrument as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	232,582	$	—	$	—	$	232,582
Corporate obligations	—		60,982		—		60,982
U.S. Treasury securities	—		64,054		—		64,054
Certificates of deposit	—		249		—		249
Total assets	$	232,582	$	125,285	$	—	$	357,867
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	3,516	$	3,516
Total liabilities	$	—	$	—	$	3,516	$	3,516

	December 31, 2019
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	193,867	$	—	$	—	$	193,867
Corporate obligations	—		138,369		—		138,369
U.S. Treasury securities	—		83,819		—		83,819
Certificates of deposit	—		493		—		493
Mortgage and other asset backed securities	—		12,470		—		12,470
Total assets	$	193,867	$	235,151	$	—	$	429,018
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	1,856	$	1,856
Total liabilities	$	—	$	—	$	1,856	$	1,856

The money market funds noted above are included in cash and cash equivalents in the accompanying condensed consolidated balance sheets. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the

reporting period. There were no transfers within the hierarchy during the six months ended June 30, 2020 or the year ended December 31, 2019.

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

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

	Six Months Ended June 30,
	2020		2019
Beginning balance	$	1,856	$	1,491
Change in fair value	1,660		(102)
Ending balance	$	3,516	$	1,389

The fair value of the warrants to purchase common stock on the date of issuance and on each re-measurement date for those warrants classified as liabilities was estimated using either the Monte Carlo simulation framework, which incorporates future financing events over the remaining life of the warrants to purchase common stock, or for certain re-measurement dates, due to the warrants being deeply in the money, the Black-Scholes option pricing model. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. At each reporting period, the Company evaluates the best valuation methodology. At June 30, 2020, the Black-Scholes option pricing model was used.

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Net Loss Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss Per Share

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

	Three Months Ended    June 30,		Six Months Ended    June 30,
	2020	2019	2020	2019
Outstanding stock options	3,680	3,995	3,680	3,995
Common stock warrants	39	39	39	39
Shares issuable under employee stock purchase plan	13	13	13	13
Outstanding restricted stock units (1)	532	461	532	461
	4,264	4,508	4,264	4,508

(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note 15.

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Comprehensive Loss	6 Months Ended
	Jun. 30, 2020
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
Comprehensive Loss	Comprehensive LossComprehensive loss is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner sources. Comprehensive loss consists of net loss and other comprehensive (loss) income, which includes certain changes in equity that are excluded from net loss. Comprehensive loss has been disclosed in the accompanying consolidated statements of operations and comprehensive loss. Accumulated other comprehensive (loss) income is presented separately on the consolidated balance sheets and consists entirely of unrealized holding gains and losses on investments as of June 30, 2020 and December 31, 2019.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

Recent Accounting PronouncementsRecently Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which the carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. On January 1, 2020 the Company adopted ASU 2016-13. For discussion regarding the impact of this accounting pronouncement and its amendments, refer to Note 5 within the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

In June 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. On January 1, 2020, the Company adopted ASU 2018-15 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity; the methodology for calculating income taxes in an interim period; and the recognition of deferred tax liabilities for outside basis differences. On January 1, 2020, the Company early adopted ASU 2019-12 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

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Warrants

6 Months Ended

Jun. 30, 2020

Warrants and Rights Note Disclosure [Abstract]

Warrants

Warrants

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

	Warrants as of
			Weighted- Average Exercise			Balance Sheet Classification
	June 30, 2020	December 31, 2019	Price Per Share		Expiration	June 30, 2020	December 31, 2019
Warrants to purchase common stock	39	39	$	5.88	July 9, 2020	Liability	Liability

All remaining outstanding warrants were automatically cashless exercised in full upon their expiration on July 9, 2020.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three months ended June 30, 2020, and, to the best of its knowledge, no material legal proceedings are currently pending or threatened.

Other

The Company is also party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met at June 30, 2020 and December 31, 2019, or royalties on future sales of specified products. See Note 14 for discussion of these arrangements. 

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is

unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

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Significant Agreements

6 Months Ended

Jun. 30, 2020

Significant Agreements [Abstract]

Significant Agreements

Significant Agreements

BMS (Bristol Myers Squibb Company)

Overview

On February 20, 2008, the Company entered into an agreement with Celgene, which was acquired by BMS in November 2019 and is now referred to herein as BMS, relating to sotatercept (the Original Sotatercept Agreement), which was amended on August 2, 2011 (as amended, the Amended Sotatercept Agreement). The Company further amended and restated the Original Sotatercept Agreement in its entirety on September 18, 2017 (the Restated Sotatercept Agreement) and clarified certain responsibilities of the Company and BMS in a letter agreement to the Restated Sotatercept Agreement on March 10, 2020. On August 2, 2011, the Company entered into a second agreement with BMS for REBLOZYL® (luspatercept-aamt) (the REBLOZYL Agreement, formerly the Luspatercept Agreement).

Since December 31, 2019, there have been no material changes to the key terms of the above agreements. For further information on the terms of the agreements, please see the notes to the consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2019.

Accounting Analysis

Upon adoption of ASC 606, all of the Company’s performance obligations pursuant to its arrangements with BMS were completed and all remaining potential milestone payments were fully constrained as they relate to future regulatory events that are outside of the Company’s control, and therefore the risk of significant reversal in the amount of cumulative revenue had not been resolved. As of June 30, 2020, the final regulatory milestone payment for REBLOZYL would be $20.0 million and would result from approval by a regulatory authority in Asia (as defined in the REBLOZYL Agreement) of a Biologics License Application (BLA) or equivalent for luspatercept-aamt in either myelodysplastic syndromes or beta-thalassemia. In accordance with the Company's accounting policy regarding revenue recognition as described in Note 2 to its Annual Report on Form 10-K, the revenue associated with this milestone will be recognized once it is probable that the application is approved by the regulatory authority. Milestone payments that are not within the control of the Company or the licensee are not considered probable of being achieved until those approvals are received. The approval of the application is not within the control of the Company or the licensee, and therefore, as of June 30, 2020, the Company cannot determine if it is probable that a regulatory agency will approve the applications.

In June 2020, the European Commission, which has the authority to approve medicines for the European Union, approved REBLOZYL based on the recommendation of the European Medicines Agency, or EMA, for the treatment of adult patients with transfusion-dependent anemia due to very low-, low- and intermediate-risk MDS with ring sideroblasts, who had an unsatisfactory response or are ineligible for erythropoietin-based therapy, and adult patients with transfusion-dependent anemia associated with beta-thalassemia. As a result, the $25.0 million milestone from European Medicines Agency (EMA) approval of a Biologics Licensing Application (BLA) or equivalent for REBLOZYL is no longer constrained. As the Company does not have any remaining performance obligations under the agreement with BMS, the full $25.0 million was recognized as revenue during the three months ended June 30, 2020.

Through June 30, 2020, under all BMS arrangements, the Company has received net cost-share payments, milestones, and royalties of $219.6 million and $44.9 million for REBLOZYL and sotatercept, respectively. The Company recorded net collaboration revenue of $39.8 million and $27.7 million during the three months ended June 30, 2020 and 2019, respectively, and $44.1 million and $30.4 million during the six months ended June 30, 2020 and 2019, respectively.

Other Agreements

In 2004, the Company entered into a license agreement with a non-profit institution for an exclusive, sublicensable, worldwide, royalty-bearing license to certain patents developed by the institution (Primary Licensed Products). In addition, the Company was granted a non-exclusive, non-sub-licensable license for Secondary Licensed Products. The Company also agreed to pay specified development milestone payments totaling up to $2.0 million for sotatercept and $0.7 million for REBLOZYL. In addition, the Company is obligated to pay milestone fees based on the Company’s research and development progress, and U.S. sublicensing revenue ranging from 10%-25%, as well as royalties ranging from 1.0%-3.5% of net sales on any products under the licenses. During the three months ended June 30, 2020 and 2019, the Company expensed $2.1 million and $1.6 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $2.4 million and $1.6

million, respectively, of milestones, fees and royalties. Milestones and fees associated with development related activities are recorded as research and development expense. Costs related to royalties on sales of commercial products are recorded as selling, general and administrative expense.

In May 2014, the Company executed a collaboration agreement with a research technology company, and such collaboration agreement was amended and restated in March 2019. The Company paid an upfront research fee of $0.3 million upon execution of the original agreement. The Company also received an option to obtain a commercial license to the molecules developed during the collaboration. During the three months ended June 30, 2020 and 2019, the Company expensed $0.5 million and $1.7 million, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $0.5 million and $1.9 million, respectively, of milestones and fees, which is recorded as research and development expense.

In December 2019, the Company executed a license and collaboration agreement with Fulcrum Therapeutics to identify small molecules designed to modulate specific pathways associated with a targeted indication within the pulmonary disease space. The Company paid an upfront research fee of $10.0 million upon execution of this agreement, which was expensed to research and development. The Company also agreed to pay specified research, development and commercial milestone payments of up to $295.0 million for a first product commercialized and up to a maximum of $143.5 million in additional milestone payments for all subsequent products commercialized. Fulcrum will additionally receive tiered royalty payments in the mid-single-digit to low double-digit range on net sales, as well as reimbursement for relevant research and development costs. During the three months ended June 30, 2020 and 2019, the Company expensed $0.8 million and zero, respectively, and during the six months ended June 30, 2020 and 2019, the Company expensed $1.1 million and zero, respectively, of milestones and fees, which is recorded as research and development expense.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company recognized stock-based compensation expense related to the 2003 Stock Option and Restricted Stock Plan (the 2003 Plan), the 2013 Equity Incentive Plan (the 2013 Plan), and the 2013 Employee Stock Purchase Plan (the 2013 ESPP) in the consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2020 and 2019, respectively, as follows (in thousands):

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Research and development	$	3,259	$	2,006	$	6,400	$	5,505
Selling, general and administrative	3,881		3,006		7,419		6,499
	$	7,140	$	5,012	$	13,819	$	12,004

Stock Options

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

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Expected volatility	57.9	%	58.3	%	55.4	%	59.0	%
Expected term (in years)	6.0		6.0		6.0		6.0
Risk-free interest rate	0.4	%	2.2	%	1.5	%	2.6	%
Expected dividend yield	—	%	—	%	—	%	—	%

The following table summarizes the stock option activity under the Company’s stock option plans during the six months ended June 30, 2020 (in thousands, except per share amounts and years):

	Number of Stock Options	Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life (in years)	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2019	3,820	$	36.26	6.81
Granted	926	$	58.36
Exercised	(913)	$	30.77
Canceled or forfeited	(153)	$	42.20
Outstanding at June 30, 2020	3,680	$	42.94	7.48	$	192,690
Exercisable at June 30, 2020	1,882	$	36.53	6.18	$	110,552

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at June 30, 2020.

The aggregate intrinsic value of options exercised during the six months ended June 30, 2020 was $53.5 million. 

As of June 30, 2020, there was $43.7 million of unrecognized compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of 2.72 years. 

Restricted Stock Units

The following table summarizes the restricted stock unit (RSU) activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	397	$	39.20
Granted	214	57.25
Vested	(123)	37.76
Forfeited	(31)	42.57
Unvested balance at June 30, 2020	457	$	47.80

As of June 30, 2020, there was approximately $17.4 million of related unrecognized compensation cost, which the Company expects to recognize over a remaining weighted-average period of 1.90 years.

Performance-Based Restricted Stock Units

On January 22, 2020, the Company granted performance-based restricted stock units (PSU) whereby vesting depends upon the occurrence of certain milestone events by December 31, 2022. As of June 30, 2020, none of the PSU milestones had been achieved. When achievement of a milestone becomes probable, compensation cost will be recognized from the grant date over the requisite service period. As of June 30, 2020, no related compensation cost had been recognized. The following table summarizes PSU activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	—	$	—
Granted (1)	78	52.99
Vested	—	—
Forfeited	(3)	52.99
Unvested balance at June 30, 2020	75	$	52.99

(1)Pursuant to the terms of the awards granted on January 22, 2020, the actual number of awards earned could range between 0% and 200% of the number of awards granted.

As of June 30, 2020, there was approximately $4.0 million of related unrecognized compensation cost. Depending on the actual number of awards earned, the actual expense recognized could range between 0% and 200% of this amount.

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Income Taxes	6 Months Ended
	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesDeferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets.

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Related Party Transactions

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

BMS

BMS owned 11.8% and 12.0% of the Company’s fully diluted equity as of June 30, 2020 and December 31, 2019, respectively. Refer to Note 14 for additional information regarding this collaboration arrangement.

During the three and six months ended June 30, 2020 and 2019, all revenue recognized by the Company was recognized under the BMS collaboration arrangement

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Subsequent Events

6 Months Ended

Jun. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company has evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure except as described below.

On July 6, 2020, the Company completed the sale in an underwritten public offering of 5,594,593 shares of common stock, including 729,729 shares of common stock sold pursuant to the underwriter's full exercise of their option to purchase additional shares, at a public offering price of $92.50 per share, resulting in net proceeds to the Company of $492.5 million.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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

The accompanying interim condensed consolidated financial statements are unaudited and reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of June 30, 2020, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, have not changed, and the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2019. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019, and its cash flows for the six months ended June 30, 2020 and 2019. 

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

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates

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

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these consolidated financial statements, management used significant estimates in the following areas, among others: accrued and prepaid clinical

expenses, contract manufacturing expense, stock-based compensation expense, revenue recognition and the recoverability of the Company's net deferred tax assets and related valuation allowance.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which the carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. On January 1, 2020 the Company adopted ASU 2016-13. For discussion regarding the impact of this accounting pronouncement and its amendments, refer to Note 5 within the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

In June 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. On January 1, 2020, the Company adopted ASU 2018-15 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity; the methodology for calculating income taxes in an interim period; and the recognition of deferred tax liabilities for outside basis differences. On January 1, 2020, the Company early adopted ASU 2019-12 on a prospective basis, with no material impact on its consolidated financial statements and related disclosures.

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Cash Equivalents and Short-term and Long-term Investments (Tables)

6 Months Ended

Jun. 30, 2020

Cash and Cash Equivalents [Abstract]

Available-for-sale securities with unrealized losses

The following is a summary of available-for-sale securities with unrealized losses as of June 30, 2020 (in thousands):

	Less than 12 months
	Fair Value		Unrealized Losses
Corporate obligations	21,330		(6)
U.S. government agency securities	49,984		(3)
Total available-for sale securities in an unrealized loss position	$	71,314	$	(9)

Available-for-sale securities

The following is a summary of cash, cash equivalents and available-for-sale securities as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	283,522	$	—	$	(1)	$	283,521
Available-for-sale securities:
Corporate obligations	56,828		162		(6)		56,984
U.S. Treasury securities	49,026		33		(3)		49,056
Certificates of deposit	245		4		—		249
Total available-for-sale securities	$	106,099	$	199	$	(9)	$	106,289
Total cash, cash equivalents and available-for-sale securities	$	389,621	$	199	$	(10)	$	389,810

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash and cash equivalents due in 90 days or less	$	237,677	$	—	$	—	$	237,677
Available-for-sale securities:
Corporate obligations	124,676		219		(15)		124,880
U.S. Treasury securities	78,230		98		(1)		78,327
Certificates of deposit	490		3		—		493
Mortgage and other asset backed securities	12,476		5		(12)		12,469
Total available-for-sale securities	$	215,872	$	325	$	(28)	$	216,169
Total cash, cash equivalents and available-for-sale securities	$	453,549	$	325	$	(28)	$	453,846

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Restricted Cash (Tables)

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Reconciliation of cash, cash equivalents and restricted cash

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

	June 30,
	2020		2019
Cash and cash equivalents	$	283,521	$	163,609
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	285,118	$	165,206

Restrictions on cash and cash equivalents

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

	June 30,
	2020		2019
Cash and cash equivalents	$	283,521	$	163,609
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	285,118	$	165,206

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of financial instruments carried at fair value

The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input that is significant to each financial instrument as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	232,582	$	—	$	—	$	232,582
Corporate obligations	—		60,982		—		60,982
U.S. Treasury securities	—		64,054		—		64,054
Certificates of deposit	—		249		—		249
Total assets	$	232,582	$	125,285	$	—	$	357,867
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	3,516	$	3,516
Total liabilities	$	—	$	—	$	3,516	$	3,516

	December 31, 2019
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	193,867	$	—	$	—	$	193,867
Corporate obligations	—		138,369		—		138,369
U.S. Treasury securities	—		83,819		—		83,819
Certificates of deposit	—		493		—		493
Mortgage and other asset backed securities	—		12,470		—		12,470
Total assets	$	193,867	$	235,151	$	—	$	429,018
Liabilities:
Warrants to purchase common stock	$	—	$	—	$	1,856	$	1,856
Total liabilities	$	—	$	—	$	1,856	$	1,856

Summary of changes in the fair value of the preferred and common stock warrant liability

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

	Six Months Ended June 30,
	2020		2019
Beginning balance	$	1,856	$	1,491
Change in fair value	1,660		(102)
Ending balance	$	3,516	$	1,389

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Schedule of anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share

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

	Three Months Ended    June 30,		Six Months Ended    June 30,
	2020	2019	2020	2019
Outstanding stock options	3,680	3,995	3,680	3,995
Common stock warrants	39	39	39	39
Shares issuable under employee stock purchase plan	13	13	13	13
Outstanding restricted stock units (1)	532	461	532	461
	4,264	4,508	4,264	4,508

(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note 15.

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Warrants (Tables)

6 Months Ended

Jun. 30, 2020

Warrants and Rights Note Disclosure [Abstract]

Summary of the number of shares issuable upon exercise of outstanding warrants and the terms and accounting treatment for the outstanding warrants

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

	Warrants as of
			Weighted- Average Exercise			Balance Sheet Classification
	June 30, 2020	December 31, 2019	Price Per Share		Expiration	June 30, 2020	December 31, 2019
Warrants to purchase common stock	39	39	$	5.88	July 9, 2020	Liability	Liability

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Schedule of compensation costs recognized

The Company recognized stock-based compensation expense related to the 2003 Stock Option and Restricted Stock Plan (the 2003 Plan), the 2013 Equity Incentive Plan (the 2013 Plan), and the 2013 Employee Stock Purchase Plan (the 2013 ESPP) in the consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2020 and 2019, respectively, as follows (in thousands):

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Research and development	$	3,259	$	2,006	$	6,400	$	5,505
Selling, general and administrative	3,881		3,006		7,419		6,499
	$	7,140	$	5,012	$	13,819	$	12,004

Schedule of weighted-average assumptions used for estimating fair value

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

	Three Months Ended    June 30,				Six Months Ended    June 30,
	2020		2019		2020		2019
Expected volatility	57.9	%	58.3	%	55.4	%	59.0	%
Expected term (in years)	6.0		6.0		6.0		6.0
Risk-free interest rate	0.4	%	2.2	%	1.5	%	2.6	%
Expected dividend yield	—	%	—	%	—	%	—	%

Summary of stock option activity

The following table summarizes the stock option activity under the Company’s stock option plans during the six months ended June 30, 2020 (in thousands, except per share amounts and years):

	Number of Stock Options	Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life (in years)	Aggregate Intrinsic Value(1)
Outstanding at December 31, 2019	3,820	$	36.26	6.81
Granted	926	$	58.36
Exercised	(913)	$	30.77
Canceled or forfeited	(153)	$	42.20
Outstanding at June 30, 2020	3,680	$	42.94	7.48	$	192,690
Exercisable at June 30, 2020	1,882	$	36.53	6.18	$	110,552

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at June 30, 2020.

Schedule of nonvested restricted stock units activity

The following table summarizes the restricted stock unit (RSU) activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	397	$	39.20
Granted	214	57.25
Vested	(123)	37.76
Forfeited	(31)	42.57
Unvested balance at June 30, 2020	457	$	47.80

Share-based compensation, performance shares award nonvested activity

The following table summarizes PSU activity under the 2013 Plan during the six months ended June 30, 2020 (in thousands, except per share amounts):

	Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019	—	$	—
Granted (1)	78	52.99
Vested	—	—
Forfeited	(3)	52.99
Unvested balance at June 30, 2020	75	$	52.99

(1)Pursuant to the terms of the awards granted on January 22, 2020, the actual number of awards earned could range between 0% and 200% of the number of awards granted.

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Segment Information (Details)	6 Months Ended
	Jun. 30, 2020 numberOfSegment
Segment Information
Number of operating segments	1

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Cash Equivalents and Short-term and Long-term Investments Summary of Available-for-sale Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 71,314
Unrealized Losses	(9)	$ (35,800)
Corporate obligations
Debt Securities, Available-for-sale [Line Items]
Fair Value	21,330
Unrealized Losses	(6)
U.S. government agency securities
Debt Securities, Available-for-sale [Line Items]
Fair Value	49,984
Unrealized Losses	$ (3)

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Cash Equivalents and Short-term and Long-term Investments - Narrative (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Cash and Cash Equivalents [Abstract]
Unrealized loss position, less than twelve months, fair value	$ 9,000	$ 35,800,000
Continuous unrealized loss position, twelve months or longer, fair value		0
Continuous unrealized loss position, fair value		$ 0

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Cash Equivalents and Short-term and Long-term Investments - Summary of Cash, Cash Equivalents and Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Cash and cash equivalents due in 90 days or less
Amortized Cost	$ 283,522	$ 237,677
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(1)	0
Estimated Fair Value	283,521	237,677	$ 163,609
Available-for-sale securities:
Amortized Cost	106,099	215,872
Gross Unrealized Gains	199	325
Gross Unrealized Losses	(9)	(28)
Estimated Fair Value	106,289	216,169
Total cash, cash equivalents and available-for-sale securities
Amortized Cost	389,621	453,549
Gross Unrealized Gains	199	325
Gross Unrealized Losses	(10)	(28)
Estimated Fair Value	389,810	453,846
Corporate obligations
Available-for-sale securities:
Amortized Cost	56,828	124,676
Gross Unrealized Gains	162	219
Gross Unrealized Losses	(6)	(15)
Estimated Fair Value	56,984	124,880
U.S. Treasury securities
Available-for-sale securities:
Amortized Cost	49,026	78,230
Gross Unrealized Gains	33	98
Gross Unrealized Losses	(3)	(1)
Estimated Fair Value	49,056	78,327
Certificates of deposit
Available-for-sale securities:
Amortized Cost	245	490
Gross Unrealized Gains	4	3
Gross Unrealized Losses	0	0
Estimated Fair Value	$ 249	493
Mortgage and other asset backed securities
Available-for-sale securities:
Amortized Cost		12,476
Gross Unrealized Gains		5
Gross Unrealized Losses		(12)
Estimated Fair Value		$ 12,469

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Restricted Cash (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Cash and cash equivalents	$ 283,521	$ 237,677	$ 163,609
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	285,118	239,274	$ 165,206	$ 145,649
Certificates of Deposits and Money Market Funds | Letter of Credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Restricted cash	$ 1,600	$ 1,600

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Concentrations of Credit Risk and Off-Balance Sheet Risk (Details)	Jun. 30, 2020 USD ($)
Risks and Uncertainties [Abstract]
Allowance for credit losses	$ 0

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Fair Value Measurements - Financial Instrument at Fair Value Schedule (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Assets:
Total assets	$ 357,867	$ 429,018
Liabilities:
Total liabilities	3,516	1,856
Common stock warrants
Liabilities:
Total liabilities	3,516	1,856
Money market funds
Assets:
Total assets	232,582	193,867
Corporate obligations
Assets:
Total assets	60,982	138,369
U.S. Treasury securities
Assets:
Total assets	64,054	83,819
Certificates of deposit
Assets:
Total assets	249	493
Mortgage and other asset backed securities
Assets:
Total assets		12,470
Quoted Prices in Active Markets for Identical Items (Level 1)
Assets:
Total assets	232,582	193,867
Liabilities:
Total liabilities	0	0
Quoted Prices in Active Markets for Identical Items (Level 1) | Common stock warrants
Liabilities:
Total liabilities	0	0
Quoted Prices in Active Markets for Identical Items (Level 1) | Money market funds
Assets:
Total assets	232,582	193,867
Quoted Prices in Active Markets for Identical Items (Level 1) | Corporate obligations
Assets:
Total assets	0	0
Quoted Prices in Active Markets for Identical Items (Level 1) | U.S. Treasury securities
Assets:
Total assets	0	0
Quoted Prices in Active Markets for Identical Items (Level 1) | Certificates of deposit
Assets:
Total assets	0	0
Quoted Prices in Active Markets for Identical Items (Level 1) | Mortgage and other asset backed securities
Assets:
Total assets		0
Significant Other Observable Inputs (Level 2)
Assets:
Total assets	125,285	235,151
Liabilities:
Total liabilities	0	0
Significant Other Observable Inputs (Level 2) | Common stock warrants
Liabilities:
Total liabilities	0	0
Significant Other Observable Inputs (Level 2) | Money market funds
Assets:
Total assets	0	0
Significant Other Observable Inputs (Level 2) | Corporate obligations
Assets:
Total assets	60,982	138,369
Significant Other Observable Inputs (Level 2) | U.S. Treasury securities
Assets:
Total assets	64,054	83,819
Significant Other Observable Inputs (Level 2) | Certificates of deposit
Assets:
Total assets	249	493
Significant Other Observable Inputs (Level 2) | Mortgage and other asset backed securities
Assets:
Total assets		12,470
Significant Unobservable Inputs (Level 3)
Assets:
Total assets	0	0
Liabilities:
Total liabilities	3,516	1,856
Significant Unobservable Inputs (Level 3) | Common stock warrants
Liabilities:
Total liabilities	3,516	1,856
Significant Unobservable Inputs (Level 3) | Money market funds
Assets:
Total assets	0	0
Significant Unobservable Inputs (Level 3) | Corporate obligations
Assets:
Total assets	0	0
Significant Unobservable Inputs (Level 3) | U.S. Treasury securities
Assets:
Total assets	0	0
Significant Unobservable Inputs (Level 3) | Certificates of deposit
Assets:
Total assets	$ 0	0
Significant Unobservable Inputs (Level 3) | Mortgage and other asset backed securities
Assets:
Total assets		$ 0

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Fair Value Measurements - Preferred and Common Stock Warrant Liability Rollforward (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Summary of changes in the fair value of the preferred and common stock warrant liability classified within Level 3 of the fair value hierarchy
Beginning balance	$ 1,856	$ 1,491
Change in fair value	1,660	(102)
Ending balance	$ 3,516	$ 1,389

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Net Loss Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net Income (Loss) Per Share
Anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share (in shares)	4,264	4,508	4,264	4,508
Outstanding stock options
Net Income (Loss) Per Share
Anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share (in shares)	3,680	3,995	3,680	3,995
Common stock warrants
Net Income (Loss) Per Share
Anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share (in shares)	39	39	39	39
Shares issuable under employee stock purchase plan
Net Income (Loss) Per Share
Anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share (in shares)	13	13	13	13
Outstanding restricted stock units
Net Income (Loss) Per Share
Anti-dilutive common stock equivalents excluded from the calculation of diluted net loss per share (in shares)	532	461	532	461

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Warrants (Details) - Warrants to purchase Common stock expiring between June 10, 2020 to July 9, 2020 - $ / shares shares in Thousands	Jun. 30, 2020	Dec. 31, 2019
Warrants
Warrants (in shares)	39	39
Weighted-average exercise price per share (in usd per share)	$ 5.88

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Significant Agreements - Celgene, Accounting Analysis (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Significant Agreements
Revenue from contract with customer	$ 39,752	$ 27,666	$ 44,096	$ 30,447
REBLOZYL Agreement | Collaboration, License, and Option Agreement
Significant Agreements
Payments received			219,600
Revenue from contract with customer	25,000
Sotarcept | Collaboration, License, and Option Agreement
Significant Agreements
Payments received			44,900
Regulatory Milestone | Luspatercept | Collaboration, License, and Option Agreement
Significant Agreements
Collaborative arrangement potential milestone payments on acceptance of regulatory application	$ 20,000		$ 20,000

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Significant Agreements - Other Agreements (Details) - USD ($)	1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2019	May 31, 2014	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2004
Significant Agreements
Milestones and fees			$ 38,251,000	$ 34,765,000	$ 75,917,000	$ 67,536,000
License agreement with antibody technology company
Significant Agreements
Milestones and fees			500,000	1,700,000	500,000	1,900,000
License agreement with antibody technology company | Additional Research Fees
Significant Agreements
Collaborative arrangement amount paid and expensed		$ 300,000
License Agreement With Fulcrum Therapeutics
Significant Agreements
Milestones and fees			800,000	0	1,100,000	0
License Agreement With Fulcrum Therapeutics | Additional Research Fees
Significant Agreements
Collaborative arrangement amount paid and expensed	$ 10,000,000.0
License Agreement With Fulcrum Therapeutics | Additional Research Fees | Maximum
Significant Agreements
Total potential milestone payments (up to)	143,500,000
License Agreement With Fulcrum Therapeutics | Research, Development and Commercial Milestone Payments | Maximum
Significant Agreements
Total potential milestone payments (up to)	$ 295,000,000.0
Non-collaborative Arrangement Transactions | Sotarcept | Development milestone | Maximum
Significant Agreements
Total potential milestone payments (up to)							$ 2,000,000.0
Non-collaborative Arrangement Transactions | REBLOZYL Agreement | Development milestone | Maximum
Significant Agreements
Total potential milestone payments (up to)							$ 700,000
Non-collaborative Arrangement Transactions | License Agreement with Non Profit Institution
Significant Agreements
Milestones and fees			$ 2,100,000	$ 1,600,000	$ 2,400,000	$ 1,600,000
Non-collaborative Arrangement Transactions | License Agreement with Non Profit Institution | Maximum
Significant Agreements
Milestone fees payable as percentage of research and U.S. development progress and sublicensing revenue							25.00%
Royalty payable as percentage of net sales							3.50%
Non-collaborative Arrangement Transactions | License Agreement with Non Profit Institution | Minimum
Significant Agreements
Milestone fees payable as percentage of research and U.S. development progress and sublicensing revenue							10.00%
Royalty payable as percentage of net sales							1.00%

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Stock-Based Compensation - Schedule of Stock-Based Compensation Costs Recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	$ 7,140	$ 5,012	$ 13,819	$ 12,004
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	3,259	2,006	6,400	5,505
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	$ 3,881	$ 3,006	$ 7,419	$ 6,499

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Stock-Based Compensation - Schedule of Weighted-Average Assumptions Used for Estimating Fair Value (Details) - Stock Option	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award
Expected volatility	57.90%	58.30%	55.40%	59.00%
Expected term (in years)	6 years	6 years	6 years	6 years
Risk-free interest rate	0.40%	2.20%	1.50%	2.60%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Stock-Based Compensation - Summary of Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2019 $ / shares shares
Number of Stock Options
Outstanding at the beginning of period (in shares) | shares	3,820
Granted (in shares) | shares	926
Exercised (in shares) | shares	(913)
Canceled or forfeited (in shares) | shares	(153)
Outstanding at the end of the period (in shares) | shares	3,680	3,820
Exercisable at the end of the period (in shares) | shares	1,882
Weighted- Average Exercise Price Per Share
Outstanding at the beginning of period (in usd per share) | $ / shares	$ 36.26
Granted (in usd per share) | $ / shares	58.36
Exercised (in usd per share) | $ / shares	30.77
Canceled or forfeited (in usd per share) | $ / shares	42.20
Outstanding at the end of the period (in usd per share) | $ / shares	42.94	$ 36.26
Exercisable at the end of the period (in usd per share) | $ / shares	$ 36.53
Weighted- Average Contractual Life (in years)
Outstanding at the beginning of the period	7 years 5 months 23 days	6 years 9 months 21 days
Outstanding at the end of the period	7 years 5 months 23 days	6 years 9 months 21 days
Exercisable at the end of the period	6 years 2 months 4 days
Aggregate Intrinsic Value
Outstanding at the end of the period | $	$ 192,690
Exercisable at the end of the period | $	110,552
Aggregate intrinsic value of options exercised | $	53,500
Unrecognized compensation expense | $	$ 43,700
Weighted-average period for recognition	2 years 8 months 19 days

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Stock-Based Compensation - Schedule of Nonvested Restricted Stock Activity (Details) $ / shares in Units, shares in Thousands, $ in Millions	6 Months Ended
	Jun. 30, 2020 USD ($) $ / shares shares
Weighted- Average Grant Date Fair Value
Weighted-average period for recognition	2 years 8 months 19 days
Restricted Stock Units
Number of Grants
Unvested balance at beginning of the period (in shares) | shares	397
Granted (in shares) | shares	214
Vested (in shares) | shares	(123)
Forfeited (in shares) | shares	(31)
Unvested balance at end of the period (in shares) | shares	457
Weighted- Average Grant Date Fair Value
Unvested balance at beginning of the period (in usd per share) | $ / shares	$ 39.20
Granted (in usd per share) | $ / shares	57.25
Vested (in usd per share) | $ / shares	37.76
Forfeited (in usd per share) | $ / shares	42.57
Unvested balance at end of the period (in usd per share) | $ / shares	$ 47.80
Unrecognized compensation cost | $	$ 17.4
Weighted-average period for recognition	1 year 10 months 24 days
Performance-Based Restricted Stock Units
Number of Grants
Unvested balance at beginning of the period (in shares) | shares	0
Granted (in shares) | shares	78
Vested (in shares) | shares	0
Forfeited (in shares) | shares	(3)
Unvested balance at end of the period (in shares) | shares	75
Weighted- Average Grant Date Fair Value
Unvested balance at beginning of the period (in usd per share) | $ / shares	$ 0
Granted (in usd per share) | $ / shares	52.99
Vested (in usd per share) | $ / shares	0
Forfeited (in usd per share) | $ / shares	52.99
Unvested balance at end of the period (in usd per share) | $ / shares	$ 52.99
Unrecognized compensation cost | $	$ 4.0
Minimum
Weighted- Average Grant Date Fair Value
Actual awards earned percentage of expected expense recognized	0.00%
Maximum
Weighted- Average Grant Date Fair Value
Actual awards earned percentage of expected expense recognized	200.00%

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Related Party Transactions (Details)	Jun. 30, 2020	Dec. 31, 2019
Bristol-Myers Squibb Company (BMS, formerly Celgene) | Bristol-Myers Squibb Company (BMS, formerly Celgene)
Related Party Transactions
Ownership percentage of entity's fully diluted equity	11.80%	12.00%

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Subsequent Events (Details) - Subsequent Event $ / shares in Units, $ in Millions	Jul. 06, 2020 USD ($) $ / shares shares
Subsequent Event [Line Items]
Sale of stock, consideration received | $	$ 492.5
Public Stock Offering
Subsequent Event [Line Items]
Number of shares issued in transaction (in shares)	5,594,593
Price per share (in usd per share) | $ / shares	$ 92.50
Over-Allotment Option
Subsequent Event [Line Items]
Number of shares issued in transaction (in shares)	729,729