xlrn-20210331

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 March 31, 2021

☐ 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 ☒ No ☐

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 ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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 ☒

As of April 30, 2021, there were 60,699,406 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020	4

	Condensed Consolidated Statements of Stockholders Equity for the three months ended March 31, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	25

Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION		27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 6.	Exhibits	27

SIGNATURES		28

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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)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	455,513	$	670,952
Short-term investments	231,736		178,951
Collaboration receivables (all amounts are with a related party)	25,207		26,101
Prepaid expenses and other current assets	25,156		17,265
Total current assets	737,612		893,269
Property and equipment, net	7,856		7,768
Operating lease - right of use asset, net	20,415		21,988

Long-term investments	108,193		7,585
Other assets	1,717		1,727
Total assets	$	875,793	$	932,337
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,463	$	8,472
Accrued expenses	38,074		44,681
Operating lease liability - right of use	7,282		7,010

Total current liabilities	49,819		60,163
Operating lease liability - right of use, net of current portion	15,143		17,067



Total liabilities	64,962		77,230
Commitments and contingencies (Note 12)	—		—
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value: 25,000,000 shares authorized and no shares issued or outstanding	—		—
Common stock, $0.001 par value: 175,000,000 shares authorized; 60,638,494 and 60,383,867 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	60		60
Additional paid-in capital	1,752,096		1,732,772
Accumulated deficit	(940,908)		(877,437)
Accumulated other comprehensive loss	(417)		(288)
Total stockholders’ equity	810,831		855,107
Total liabilities and stockholders’ equity	$	875,793	$	932,337

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
	2021		2020
Revenue:
Collaboration revenue:

Cost-sharing, net	$	2,362	$	2,824
Royalty	22,396		1,520
Total revenue (all amounts are with a related party)	24,758		4,344
Costs and expenses:
Research and development	57,299		37,663
Selling, general and administrative	31,062		18,253
Total costs and expenses	88,361		55,916
Loss from operations	(63,603)		(51,572)


Other, income net	137		648
Loss before income taxes	(63,466)		(50,924)
Income tax provision	(5)		(15)
Net loss	$	(63,471)	$	(50,939)
Other comprehensive loss:
Net unrealized holding losses on short-term and long-term investments during the period, net of tax	(129)		(267)
Comprehensive loss	$	(63,600)	$	(51,206)

Net loss per share- basic and diluted	$	(1.05)	$	(0.95)

Weighted-average number of common shares used in computing net loss per share- basic and diluted	60,579		53,361

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Stockholders' Equity

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

(unaudited)

Three Months Ended March 31, 2021


	Common Stock
	Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at December 31, 2020	60,383,867	$	60	$	1,732,772	$	(877,437)	$	(288)	$	855,107
Stock-based compensation	—	—		15,626		—		—		15,626
Exercise of stock options	149,724	—		5,865		—		—		5,865
Vesting of restricted stock units, net of shares withheld for taxes	84,902	—		(3,888)		—		—		(3,888)
Issuance of common stock related to ESPP	20,001	—		1,721		—		—		1,721
Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(129)		(129)
Net loss	—	—		—		(63,471)				(63,471)
Balance at March 31, 2021	60,638,494	$	60	$	1,752,096	$	(940,908)	$	(417)	$	810,831

Three Months Ended March 31, 2020


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

Exercise of stock options	295,757	—		8,485		—				8,485
Vesting of restricted stock units, net of shares withheld for taxes	77,949	—		(472)		—				(472)
Issuance of common stock related to ESPP	22,647	—		860		—				860
Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(267)		(267)
Net loss	—	—		—		(50,939)				(50,939)
Balance at March 31, 2020	53,519,920	$	53	$	1,176,359	$	(762,346)	$	(244)	$	413,822

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Acceleron Pharma Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


	Three Months Ended March 31,
	2021		2020
Operating Activities
Net loss	$	(63,471)	$	(50,939)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,026		996
Stock-based compensation	15,626		6,679

Other non-cash items	(3,218)		1,365

Changes in assets and liabilities:
Prepaid expenses and other assets	(7,882)		828
Collaboration receivables (all amounts are with a related party)	894		112
Non-cash lease expense	1,574		1,377
Accounts payable	(4,178)		1,634
Accrued expenses	(6,643)		(7,148)

Operating lease obligations	(1,652)		(1,466)
Other changes in operating assets and liabilities	—		17
Net cash used in operating activities	(67,924)		(46,545)
Investing Activities
Purchases of investments	(270,144)		(10,454)
Proceeds from sales and maturities of investments	119,851		88,361
Purchases of property and equipment	(920)		(426)
Net cash (used in) provided by investing activities	(151,213)		77,481
Financing Activities


Net proceeds from exercises and vesting of stock awards, and ESPP contributions	3,698		8,873
Net cash provided by financing activities	3,698		8,873
Net (decrease) increase in cash, cash equivalents and restricted cash	(215,439)		39,809
Cash, cash equivalents and restricted cash at beginning of period	672,549		239,274
Cash, cash equivalents and restricted cash at end of period	$	457,110	$	279,083
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	$	205	$	425

See accompanying notes to these condensed consolidated financial statements.

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Acceleron Pharma Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Acceleron Pharma Inc. (Acceleron or the Company) is a Cambridge, Massachusetts-based 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, risks of relying on third parties, risks of clinical trial failures, dependence on key personnel, protection of proprietary technology, and compliance with government regulations.

2. Basis of Presentation

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

The accompanying interim condensed consolidated financial statements are unaudited and reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the financial statements. As of March 31, 2021, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, have not changed, and the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2020. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2021, the results of its operations for the three months ended March 31, 2021 and 2020, and its cash flows for the three months ended March 31, 2021 and 2020.

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

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

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

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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.

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, 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 March 31, 2021 as “available-for-sale” pursuant to ASC 320, Investments – Debt and Equity Securities. The Company records available-for-sale securities at fair value, with the unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. There were no realized gains or losses on marketable securities for the years ended the three months ended March 31, 2021, and 2020.

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

The Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such amortization and accretion in interest income. The cost of securities sold is based on the specific identification method. The Company includes interest and dividends on securities classified as available-for-sale in interest income in the accompanying condensed consolidated statements of operations and comprehensive loss. Accrued interest receivable relating to the Company's available-for-sale securities is presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets, and amounted to $1.2 million and $0.3 million at March 31, 2021 and December 31, 2020, respectively.

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 for less than 12 months as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021				December 31, 2020
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate obligations	$	229,629	$	(144)	$	54,724	$	(13)
U.S. Treasury securities	19,554		(8)		72,289		(7)
Mortgage and other asset backed securities	—		—		4,998		(2)
Total available-for sale securities in an unrealized loss position	$	249,183	$	(152)	$	132,012	$	(22)

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At March 31, 2021, our security portfolio consisted of 99 securities related to investments in debt securities available-for-sale, of which 79 securities were in an unrealized loss position. There were no securities in an unrealized loss position for greater than 12 months as of March 31, 2021. The unrealized losses on the Company's available-for-sale securities were caused by central bank and market interest rate decreases on securities purchased at a premium. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost 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 March 31, 2021.

The following is a summary of cash, cash equivalents and available-for-sale securities as of March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value





Cash and cash equivalents due in 90 days or less	$	455,514	$	—	$	(1)	$	455,513
Available-for-sale securities:
Corporate obligations	265,321		4		(144)		265,181
U.S. Treasury securities	74,750		6		(8)		74,748


Total available-for-sale securities (1)	$	340,071	$	10	$	(152)	$	339,929
Total cash, cash equivalents and available-for-sale securities	$	795,585	$	10	$	(153)	$	795,442


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

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

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):


	March 31,
	2021		2020
Cash and cash equivalents	$	455,513	$	277,486
Restricted cash	1,597		1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	457,110	$	279,083

As of March 31, 2021 and December 31, 2020, 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. Restricted cash is included within other assets in our condensed consolidated balance sheet.

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

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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 March 31, 2021 and December 31, 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 March 31, 2021 and December 31, 2020 (in thousands):


	March 31, 2021
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	396,088	$	—	$	—	$	396,088
Corporate obligations	—		276,382		—		276,382
U.S. Treasury securities	—		74,748		—		74,748


Total assets	$	396,088	$	351,130	$	—	$	747,218


	December 31, 2020
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Money market funds	$	266,562	$	—	$	—	$	266,562
Corporate obligations	—		60,982		—		60,982
U.S. Treasury securities	—		215,310		—		215,310
Certificates of deposit	—		246		—		246
Mortgage and other asset backed securities	—		4,998		—		4,998
Total assets	$	266,562	$	281,536	$	—	$	548,098

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 three months ended March 31, 2021 or the year ended December 31, 2020. Items measured at fair value on a recurring basis include short-term and long-term investments (Note 5).

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):

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	Three Months Ended March 31,
	2021	2020
Outstanding stock options	3,766	4,232
Common stock warrants	—	39
Shares issuable under employee stock purchase plan	9	13
Outstanding restricted stock units (1)	707	557
	4,482	4,841

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

10. Comprehensive Income (Loss)

Comprehensive income (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 income (loss) consists of net loss and other comprehensive income (loss), which includes certain changes in equity that are excluded from net loss. Comprehensive income (loss) has been disclosed in the accompanying condensed consolidated statements of operations and comprehensive loss. Accumulated other comprehensive loss is presented separately on the condensed consolidated balance sheets and consists entirely of unrealized holdings gains or losses on investments as of March 31, 2021 and December 31, 2020.

11. Recent Accounting Pronouncements

Not Yet Adopted

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

12. Commitments and Contingencies

Operating Leases

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

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three months ended March 31, 2021, 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 March 31, 2021 and December 31, 2020, or royalties on future sales of specified products. See Note 13 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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13. 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, and clarified certain responsibilities of the Company and BMS in a letter agreement to the Restated Sotatercept Agreement on March 10, 2020 (collectively, the Restated Sotatercept Agreement). On August 2, 2011, the Company entered into a second agreement with BMS for REBLOZYL® (luspatercept-aamt) (the REBLOZYL Agreement, formerly the Luspatercept Agreement).

Since December 31, 2020, 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, 2020.

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 related to future regulatory events that were 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 March 31, 2021, the last remaining 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 March 31, 2021, the Company cannot determine if it is probable that a regulatory agency will approve the applications.

Through March 31, 2021, under all BMS arrangements, the Company has received net cost-share payments, milestones, and royalties of $282.2 million and $45.0 million for REBLOZYL and sotatercept, 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 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 developed under the licenses. During the three months ended March 31, 2021 and 2020, the Company expensed zero and $0.2 million, respectively, of milestones and fees. Milestones and fees associated with development related activities are recorded as research and development expense. During the three months ended March 31, 2021 and 2020, the Company expensed $1.2 million and $0.1 million, respectively, of royalties. 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 March 31, 2021 and 2020, the Company did not reach any milestones defined under the agreement and, therefore, no amounts have been paid or expensed.

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

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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 March 31, 2021 and 2020, the Company expensed $0.5 million and $0.3 million, respectively, of fees, which is recorded as research and development expense.

14. Stock-Based Compensation

During the quarter ended March 31, 2021, the Company updated the equity award agreements with respect to the 2013 Equity Incentive Plan (the 2013 Plan) to enhance the vesting terms for retirement eligible employees and directors for awards granted in 2021 and future awards. Where awards are granted with non-substantive vesting periods (for instance, where all or a portion of the award continues to vest upon retirement eligibility), the Company recognizes expense based on the period from the grant date to the date the employee becomes retirement eligible.

The Company recognized stock-based compensation expense related to the 2003 Stock Option and Restricted Stock Plan (the 2003 Plan), the 2013 Plan, and the 2013 Employee Stock Purchase Plan (the 2013 ESPP) in the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2021 and 2020, respectively, as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Research and development	$	8,158	$	3,141
Selling, general and administrative	7,468		3,538
	$	15,626	$	6,679

Stock Options

The following table summarizes the stock option activity under the Company’s stock option plans during the three months ended March 31, 2021 (in thousands, except per share amounts and years):


	Number of Shares (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2020	3,378	$	49.78	7.35	$	264,046
Granted	573	$	116.85
Exercised	(150)	$

SEC Form 10-Q filed by Acceleron Pharma Inc.