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Table of Contents
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 September 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
(617649-9200
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 per shareXLRNThe 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 filerx Accelerated filero
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 October 31, 2020, there were 60,252,012 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.


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TABLE OF CONTENTS
  Page
 
 
 
 
 

2

Table of Contents
PART I. FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
Acceleron Pharma Inc. 
Condensed Consolidated Balance Sheets 
(amounts in thousands, except share and per share data)
(unaudited)
September 30, 2020December 31, 2019
Assets 
Current assets: 
Cash and cash equivalents$729,685 $237,677 
Collaboration receivables (all amounts are with a related party)22,561 8,547 
Prepaid expenses and other current assets8,854 10,000 
Short-term investments152,677 193,692 
Total current assets913,777 449,916 
Property and equipment, net7,621 6,812 
Operating lease - right of use asset, net19,660 23,908 
Other assets1,708 1,793 
Long-term investments4,999 22,477 
Total assets$947,765 $504,906 
Liabilities and stockholders’ equity 
Current liabilities: 
Accounts payable$8,861 $2,295 
Accrued expenses21,917 24,895 
Operating lease liability - right of use6,524 6,183 
Total current liabilities37,302 33,373 
Operating lease liability - right of use, net of current portion15,327 20,201 
Warrants to purchase common stock 1,856 
Total liabilities52,629 55,430 
Commitments and contingencies (Note 13)
Stockholders’ equity: 
Common stock, $0.001 par value: 175,000,000 shares authorized; 60,052,046 and 53,123,567 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
60 53 
Additional paid-in capital1,715,343 1,160,807 
Accumulated deficit(820,042)(711,407)
Accumulated other comprehensive (loss) income(225)23 
Total stockholders’ equity895,136 449,476 
Total liabilities and stockholders’ equity$947,765 $504,906 
 
See accompanying notes to these condensed consolidated financial statements.
3

Table of Contents
Acceleron Pharma Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(amounts in thousands, except per share data)
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Revenue:   
Collaboration revenue:   
Milestone$ $ $25,000 $25,000 
Cost-sharing, net3,298 4,208 9,800 9,655 
Royalty19,263  31,856  
Total revenue (all amounts are with a related party)22,561 4,208 66,656 34,655 
Costs and expenses:   
Research and development40,747 37,630 116,663 105,125 
Selling, general and administrative21,042 15,501 59,705 40,394 
Total costs and expenses61,789 53,131 176,368 145,519 
Loss from operations(39,228)(48,923)(109,712)(110,864)
Other (expense), income net(6)3,520 1,108 9,523 
Loss before income taxes(39,234)(45,403)(108,604)(101,341)
Income tax (provision) benefit(11)34 (31)58 
Net loss$(39,245)$(45,369)$(108,635)$(101,283)
Other comprehensive (loss) income:
Net unrealized holding (losses) gains on short-term and long-term investments during the period, net of tax(142)(29)(248)691 
Comprehensive loss$(39,387)$(45,398)$(108,883)$(100,592)
Net loss per share- basic and diluted$(0.66)$(0.86)$(1.95)$(1.94)
Weighted-average number of common shares used in computing net loss per share- basic and diluted59,640 52,882 55,635 52,239 
 
See accompanying notes to these condensed consolidated financial statements.
4

Table of Contents
Acceleron Pharma Inc. 
Condensed Consolidated Statements of Stockholders' Equity
(amounts in thousands, except share and per share data)
(unaudited)

Three and Nine Months Ended September 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, 201953,123,567 $53 $1,160,807 $(711,407)$23 $449,476 
Stock-based compensation— — 6,679 — — 6,679 
Exercise of stock options295,757 — 8,485 — — 8,485 
Vesting of restricted stock units, net of shares withheld for taxes77,949 — (472)— — (472)
Issuance of common stock related to ESPP22,647 — 860 — — 860 
Unrealized loss on available-for-sale securities, net of tax— — — — (267)(267)
Net loss— — — (50,939)— (50,939)
Balance at March 31, 202053,519,920 53 1,176,359 (762,346)(244)413,822 
Stock-based compensation— — 7,140 — — 7,140 
Exercise of stock options617,441 1 19,609 — — 19,610 
Vesting of restricted stock units, net of shares withheld for taxes29,351 — (663)— — (663)
Unrealized gain on available-for-sale securities— — — — 161 161 
Net loss— — — (18,451)— (18,451)
Balance at June 30, 202054,166,712 54 1,202,445 (780,797)(83)421,619 
Stock-based compensation— — 7,986 — — 7,986 
Issuance of common stock net of expense $505
5,594,593 6 492,408 — — 492,414 
Exercise of stock options229,763 — 8,284 — — 8,284 
Vesting of restricted stock units, net of shares withheld for taxes10,879 — (313)— — (313)
Issuance of common stock related to ESPP13,026 — 804 — — 804 
Net exercise of warrants to purchase common stock37,073 — 3,729 — — 3,729 
Unrealized loss on available-for-sale securities— — — — (142)(142)
Net loss— — — (39,245)— (39,245)
Balance at September 30, 202060,052,046 $60 $1,715,343 $(820,042)$(225)$895,136 


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Three and Nine Months Ended September 30, 2019
 Common Stock
 Number of
Shares
$0.001 Par
Value
Additional
Paid-In Capital
Accumulated
Deficit
Comprehensive LossTotal
Stockholders'
Equity
Balance at December 31, 201846,260,747 $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 options35,919 — 766 — — 766 
Vesting of restricted stock units, net of shares withheld for taxes75,028 — (393)— — (393)
Issuance of common stock related to ESPP19,661 — 788 — — 788 
Unrealized gain on available-for-sale securities, net of tax— — — — 268 268 
Net loss— — — (38,053)— (38,053)
Balance at March 31, 201952,542,518 53 1,135,376 (624,602)(292)510,535 
Stock-based compensation— — 5,012 — — 5,012 
Exercise of stock options64,174 — 1,760 — — 1,760 
Vesting of restricted stock units, net of shares withheld for taxes146,162 — — — —  
Unrealized gain on available-for-sale securities, net of tax— — — — 452 452 
Net loss— — — (17,862)— (17,862)
Balance at June 30, 201952,752,854 53 1,142,148 (642,464)160 499,897 
Stock-based compensation— — 5,306 — — 5,306 
Exercise of stock options156,394 1 4,743 — — 4,744 
Vesting of restricted stock units, net104,217 — (252)— — (252)
Issuance of common stock related to ESPP13,598 — 504 — — 504 
Unrealized loss on available-for-sale securities, net of tax— — — (29)(29)
Net loss— — — (45,369)— (45,369)
Balance at September 30, 201953,027,063 $54 $1,152,449 (687,833)$131 $464,801 

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Acceleron Pharma Inc. 
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
 Nine Months Ended September 30,
 20202019
Operating Activities 
Net loss$(108,635)$(101,283)
Adjustments to reconcile net loss to net cash used in operating activities: 
Depreciation and amortization2,841 2,932 
Stock-based compensation21,805 17,310 
Other non-cash items1,552 (75)
Changes in assets and liabilities: 
Prepaid expenses and other assets1,231 (3,731)
Collaboration receivables (all amounts are with a related party)(14,014)164 
Non-cash lease expense4,249 3,804 
Accounts payable6,315 1,435 
Accrued expenses(3,025)5,132 
Operating lease obligations(4,533)(3,214)
Other changes in operating assets and liabilities17 (27)
Net cash used in operating activities(92,197)(77,553)
Investing Activities 
Purchases of investments(161,741)(379,096)
Proceeds from sales and maturities of investments220,240 228,258 
Purchases of property and equipment(3,303)(2,166)
Net cash provided by (used in) investing activities55,196 (153,004)
Financing Activities 
Proceeds from issuance of common stock from public offering, net of issuance costs492,414 248,130 
Net proceeds from exercises and vesting of stock awards, and ESPP contributions36,595 7,917 
Net cash provided by financing activities529,009 256,047 
Net increase in cash, cash equivalents and restricted cash492,008 25,490 
Cash, cash equivalents and restricted cash at beginning of period239,274 145,649 
Cash, cash equivalents and restricted cash at end of period$731,282 $171,139 
Supplemental Disclosure of Non-Cash Investing and Financing Activities: 
Purchase of property and equipment included in accounts payable and accrued expenses$281 $512 
Reclassification of warrant liability to additional paid-in capital$3,729 $ 



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, 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 September 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 September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019, and its cash flows for the nine months ended September 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 nine months ended September 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
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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 September 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 September 30, 2020 (in thousands):
Less than 12 months
 Fair ValueUnrealized Losses
Corporate obligations18,756 (1)
U.S. government agency securities101,674 (16)
Agency bond4,999 (1)
Total available-for sale securities in an unrealized loss position$125,429 $(18)

There were no securities in an unrealized loss position for greater than 12 months as of September 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 September 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
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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 September 30, 2020 and December 31, 2019 (in thousands):
 September 30, 2020
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents due in 90 days or less$729,686 $ $(1)$729,685 
Available-for-sale securities:
Corporate obligations39,162 57 (1)39,218 
U.S. Treasury securities113,220 8 (16)113,212 
Certificates of deposit245 2  247 
Mortgage and other asset backed securities5,000  (1)4,999 
Total available-for-sale securities (1)
$157,627 $67 $(18)$157,676 
Total cash, cash equivalents and available-for-sale securities$887,313 $67 $(19)$887,361 
 December 31, 2019
 Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Cash and cash equivalents due in 90 days or less$237,677 $ $ $237,677 
Available-for-sale securities:
Corporate obligations124,676 219 (15)124,880 
U.S. Treasury securities78,230 98 (1)78,327 
Certificates of deposit490 3  493 
Mortgage and other asset backed securities12,476 5 (12)12,469 
Total available-for-sale securities (1)
$215,872 $325 $(28)$216,169 
Total cash, cash equivalents and available-for-sale securities$453,549 $325 $(28)$453,846 
(1)All available-for-sale securities mature within two and three years as of September 30, 2020 and December 31, 2019, 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):
 September 30,
 20202019
Cash and cash equivalents$729,685 $169,542 
Restricted cash1,597 1,597 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$731,282 $171,139 
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As of September 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. Restricted cash is included within other assets in our condensed consolidated balance sheet.

7. Concentrations of Credit Risk and Off-Balance Sheet Risk
The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents, restricted cash, short-term and long-term investments, and collaboration receivables. The Company maintains its cash and cash equivalent balances and short-term and long-term investments with financial institutions that management believes are creditworthy. Short-term and long-term investments consist of investment grade corporate obligations, treasury notes, asset backed securities, and certificates of deposit. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentrations of credit risk.
The Company routinely assesses the creditworthiness of its 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 September 30, 2020.

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8. Fair Value Measurements
The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input that is significant to each financial instrument as of September 30, 2020 and December 31, 2019 (in thousands):
 September 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$186,379 $ $ $186,379 
Corporate obligations 43,336  43,336 
U.S. Treasury securities 123,210  123,210 
Certificates of deposit 247  247 
Mortgage and other asset backed securities 4,999  4,999 
Total assets$186,379 $171,792 $ $358,171 
 
 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 nine months ended September 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):
 Nine Months Ended September 30,
 20202019
Beginning balance$1,856 $1,491 
Change in fair value1,873 (165)
Settlement(3,729) 
Ending balance$ $1,326 
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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. All remaining outstanding warrants were remeasured using the Black-Scholes model upon their expiration on July 9, 2020. At September 30, 2020, there were no warrants outstanding.

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 September 30,Nine Months Ended September 30,
 2020201920202019
Outstanding stock options3,546 3,920 3,546 3,920 
Common stock warrants 39  39 
Shares issuable under employee stock purchase plan19 23 19 23 
Outstanding restricted stock units (1)
572 366 572 366 
 4,137 4,348 4,137 4,348 
(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note 16.

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 September 30, 2020 and December 31, 2019.

11. Recent Accounting Pronouncements
Recently 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,
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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
 September 30, 2020December 31, 2019Price Per
Share
ExpirationSeptember 30, 2020December 31, 2019
Warrants to purchase common stock 39 $5.88 July 9, 2020
N/A (1)
Liability

(1)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 September 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 September 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.

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.
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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 September 30, 2020, 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 September 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 the EMA approval of a BLA or equivalent for REBLOZYL was no longer constrained. As the Company did 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 September 30, 2020, under all BMS arrangements, the Company has received net cost-share payments, milestones, and royalties of $234.3 million and $44.9 million for REBLOZYL and sotatercept, respectively. The Company recorded net collaboration revenue of $22.6 million and $4.2 million during the three months ended September 30, 2020 and 2019, respectively, and $66.7 million and $34.7 million during the nine months ended September 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 September 30, 2020 and 2019, the Company expensed $1.0 million and zero, respectively, and during the nine months ended September 30, 2020 and 2019, the Company expensed $3.4 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 September 30, 2020 and 2019, the Company expensed $0.1 million and $0.1 million, respectively, and during the nine months ended September 30, 2020 and 2019, the Company expensed $0.6 million and $2.1 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 September 30, 2020 and 2019, the Company expensed $0.6 million and
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zero, respectively, and during the nine months ended September 30, 2020 and 2019, the Company expensed $1.7 million and zero, respectively, of fees, which is recorded as research and development expense.

15. Stockholders' Equity
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 $492.4 million.

16. 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 nine months ended September 30, 2020 and 2019, respectively, as follows (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Research and development$3,794 $2,107 $10,194 $7,610 
Selling, general and administrative4,192 3,199 11,611 9,700 
 $7,986 $5,306 $21,805 $17,310 
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 September 30,Nine Months Ended September 30,
 2020201920202019
Expected volatility57.7 %57.4 %55.6 %58.7 %
Expected term (in years)6.06.06.06.0
Risk-free interest rate0.4 %1.6 %1.4 %2.4 %
Expected dividend yield % % % %
The following table summarizes the stock option activity under the Company’s stock option plans during the nine months ended September 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, 20193,820 $36.26 6.81 
Granted1,041 $62.88   
Exercised(1,143)$31.83   
Canceled or forfeited(172)$42.71   
Outstanding at September 30, 20203,546 $45.19 7.42$238,802 
Exercisable at September 30, 20201,843 $37.22 6.22$138,783 
(1)    The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at September 30, 2020.
The aggregate intrinsic value of options exercised during the nine months ended September 30, 2020 was $67.7 million. 
As of September 30, 2020, there was $44.1 million of unrecognized compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of 2.61 years. 
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Restricted Stock Units
The following table summarizes the restricted stock unit (RSU) activity under the 2013 Plan during the nine months ended September 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, 2019397 $39.20 
Granted275 67.45 
Vested(137)38.64 
Forfeited(38)42.80 
Unvested balance at September 30, 2020497 $54.68 
As of September 30, 2020, there was approximately $20.7 million of related unrecognized compensation cost, which the Company expects to recognize over a remaining weighted-average period of 1.79 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 September 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 September 30, 2020, no related compensation cost had been recognized. The following table summarizes PSU activity under the 2013 Plan during the nine months ended September 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 September 30, 202075 $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 September 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.

17. 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. 

18. Related Party Transactions
BMS
BMS owned 10.9% and 12.0% of the Company’s fully diluted equity as of September 30, 2020 and December 31, 2019, respectively. Refer to Note 14 for additional information regarding this collaboration arrangement.
During the three and nine months ended September 30, 2020 and 2019, all revenue recognized by the Company was recognized under the BMS collaboration arrangement.
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19. 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.