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~~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 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 ~~October 31, 2020,~~November 1, 2021, there were ~~60,252,012~~61,155,826 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	4

	Condensed Consolidated Statements of Stockholders Equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	7

	Notes to Condensed Consolidated Financial Statements	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	29

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 6.	Exhibits	3134

SIGNATURES		3235

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, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	729,685	$	237,677	Cash and cash equivalents	$	336,456	$	670,952
Short-term investments						Short-term investments	254,113		178,951
Collaboration receivables (all amounts are with a related party)	Collaboration receivables (all amounts are with a related party)	22,561		8,547		Collaboration receivables (all amounts are with a related party)	34,195		26,101
Prepaid expenses and other current assets	Prepaid expenses and other current assets	8,854		10,000		Prepaid expenses and other current assets	71,844		17,265
Short-term investments		152,677		193,692
Total current assets	Total current assets	913,777		449,916		Total current assets	696,608		893,269
Property and equipment, net	Property and equipment, net	7,621		6,812		Property and equipment, net	9,435		7,768
Operating lease - right of use asset, net	Operating lease - right of use asset, net	19,660		23,908		Operating lease - right of use asset, net	18,310		21,988

Long-term investments						Long-term investments	61,950		7,585
Other assets	Other assets	1,708		1,793		Other assets	1,545		1,727
Long-term investments		4,999		22,477
Total assets	Total assets	$	947,765	$	504,906	Total assets	$	787,848	$	932,337
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,861	$	2,295	Accounts payable	$	5,086	$	8,472
Accrued expenses	Accrued expenses	21,917		24,895		Accrued expenses	44,122		44,681
Operating lease liability - right of use	Operating lease liability - right of use	6,524		6,183		Operating lease liability - right of use	8,163		7,010

Total current liabilities	Total current liabilities	37,302		33,373		Total current liabilities	57,371		60,163
Operating lease liability - right of use, net of current portion	Operating lease liability - right of use, net of current portion	15,327		20,201		Operating lease liability - right of use, net of current portion	11,951		17,067

Other non-current liabilities						Other non-current liabilities	373		—

Warrants to purchase common stock		0		1,856
Total liabilities	Total liabilities	52,629		55,430		Total liabilities	69,695		77,230
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)	0		0
Stockholders’ equity:	Stockholders’ equity:					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
Undesignated preferred stock, $0.001 par value: 25,000,000 shares authorized and no shares issued or outstanding						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; 61,130,687 and 60,383,867 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively						Common stock, $0.001 par value: 175,000,000 shares authorized; 61,130,687 and 60,383,867 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	61		60
Additional paid-in capital	Additional paid-in capital	1,715,343		1,160,807		Additional paid-in capital	1,793,384		1,732,772
Accumulated deficit	Accumulated deficit	(820,042)		(711,407)		Accumulated deficit	(1,074,894)		(877,437)
Accumulated other comprehensive (loss) income		(225)		23
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(398)		(288)
Total stockholders’ equity	Total stockholders’ equity	895,136		449,476		Total stockholders’ equity	718,153		855,107
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	947,765	$	504,906	Total liabilities and stockholders’ equity	$	787,848	$	932,337

See accompanying notes to these condensed consolidated financial statements.

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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Collaboration revenue:	Collaboration revenue:									Collaboration revenue:
Milestone	Milestone	$	0	$	0	$	25,000	$	25,000	Milestone	$	—	$	—	$	—	$	25,000
Cost-sharing, net	Cost-sharing, net	3,298		4,208		9,800		9,655		Cost-sharing, net	2,156		3,298		6,812		9,800
Royalty	Royalty	19,263		0		31,856		0		Royalty	32,043		19,263		80,085		31,856
Total revenue (all amounts are with a related party)	Total revenue (all amounts are with a related party)	22,561		4,208		66,656		34,655		Total revenue (all amounts are with a related party)	34,199		22,561		86,897		66,656
Costs and expenses:	Costs and expenses:									Costs and expenses:
Research and development	Research and development	40,747		37,630		116,663		105,125		Research and development	59,717		40,747		173,146		116,663
Selling, general and administrative	Selling, general and administrative	21,042		15,501		59,705		40,394		Selling, general and administrative	45,112		21,042		111,646		59,705
Total costs and expenses	Total costs and expenses	61,789		53,131		176,368		145,519		Total costs and expenses	104,829		61,789		284,792		176,368
Loss from operations	Loss from operations	(39,228)		(48,923)		(109,712)		(110,864)		Loss from operations	(70,630)		(39,228)		(197,895)		(109,712)

Other (expense), income net		(6)		3,520		1,108		9,523
Other income (expense), net										Other income (expense), net	180		(6)		466		1,108
Loss before income taxes	Loss before income taxes	(39,234)		(45,403)		(108,604)		(101,341)		Loss before income taxes	(70,450)		(39,234)		(197,429)		(108,604)
Income tax (provision) benefit		(11)		34		(31)		58
Income tax provision										Income tax provision	(15)		(11)		(28)		(31)
Net loss	Net loss	$	(39,245)	$	(45,369)	$	(108,635)	$	(101,283)	Net loss	$	(70,465)	$	(39,245)	$	(197,457)	$	(108,635)
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
Other comprehensive income (loss):										Other comprehensive income (loss):
Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax										Net unrealized holding gains (losses) on short-term and long-term investments during the period, net of tax	11		(142)		(110)		(248)
Comprehensive loss	Comprehensive loss	$	(39,387)	$	(45,398)	$	(108,883)	$	(100,592)	Comprehensive loss	$	(70,454)	$	(39,387)	$	(197,567)	$	(108,883)

Net loss per share- basic and diluted	Net loss per share- basic and diluted	$	(0.66)	$	(0.86)	$	(1.95)	$	(1.94)	Net loss per share- basic and diluted	$	(1.16)	$	(0.66)	$	(3.25)	$	(1.95)

Weighted-average number of common shares used in computing net loss per share- basic and diluted	Weighted-average number of common shares used in computing net loss per share- basic and diluted	59,640		52,882		55,635		52,239		Weighted-average number of common shares used in computing net loss per share- basic and diluted	60,937		59,640		60,748		55,635

See accompanying notes to these condensed consolidated financial statements.

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~~2021


		Common Stock												Common Stock
		Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Comprehensive Income (Loss)		Total Stockholders' Equity			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
Balance at December 31, 2020													Balance at December 31, 2020	60,383,867	$	60	$	1,732,772	$	(877,437)	$	(288)	$	855,107
Stock-based compensation	Stock-based compensation	—	—		6,679		—		—		6,679		Stock-based compensation	—	—		15,626		—		—		15,626
Exercise of stock options	Exercise of stock options	295,757	—		8,485		—		—		8,485		Exercise of stock options	149,724	—		5,865		—		—		5,865
Vesting of restricted stock units, net of shares withheld for taxes	Vesting of restricted stock units, net of shares withheld for taxes	77,949	—		(472)		—		—		(472)		Vesting of restricted stock units, net of shares withheld for taxes	84,902	—		(3,888)		—		—		(3,888)
Issuance of common stock related to ESPP	Issuance of common stock related to ESPP	22,647	—		860		—		—		860		Issuance of common stock related to ESPP	20,001	—		1,721		—		—		1,721
Unrealized loss on available-for-sale securities, net of tax	Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(267)		(267)		Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(129)		(129)
Net loss	Net loss	—	—		—		(50,939)		—		(50,939)		Net loss	—	—		—		(63,471)		—		(63,471)
Balance at March 31, 2020		53,519,920	53		1,176,359		(762,346)		(244)		413,822
Balance at March 31, 2021													Balance at March 31, 2021	60,638,494	60		1,752,096		(940,908)		(417)		810,831
Stock-based compensation	Stock-based compensation	—	—		7,140		—		—		7,140		Stock-based compensation	—	—		13,479		—		—		13,479
Exercise of stock options	Exercise of stock options	617,441	1		19,609		—		—		19,610		Exercise of stock options	100,450	—		4,055		—		—		4,055
Vesting of restricted stock units, net of shares withheld for taxes	Vesting of restricted stock units, net of shares withheld for taxes	29,351	—		(663)		—		—		(663)		Vesting of restricted stock units, net of shares withheld for taxes	38,614	1		(1,819)		—		—		(1,818)
Unrealized gain on available-for-sale securities	Unrealized gain on available-for-sale securities	—	—		—		—		161		161		Unrealized gain on available-for-sale securities	—	—		—		—		8		8
Net loss	Net loss	—	—		—		(18,451)		—		(18,451)		Net loss	—	—		—		(63,521)		—		(63,521)
Balance at June 30, 2020		54,166,712	54		1,202,445		(780,797)		(83)		421,619
Balance at June 30, 2021													Balance at June 30, 2021	60,777,558	61		1,767,811		(1,004,429)		(409)		763,034
Stock-based compensation	Stock-based compensation	—	—		7,986		—		—		7,986		Stock-based compensation	—	—		11,421		—		—		11,421
Issuance of common stock net of expense $505		5,594,593	6		492,408		—		—		492,414
Exercise of stock options	Exercise of stock options	229,763	—		8,284		—		—		8,284		Exercise of stock options	331,858	—		13,822		—		—		13,822
Vesting of restricted stock units, net of shares withheld for taxes	Vesting of restricted stock units, net of shares withheld for taxes	10,879	—		(313)		—		—		(313)		Vesting of restricted stock units, net of shares withheld for taxes	12,335	—		(689)		—		—		(689)
Issuance of common stock related to ESPP	Issuance of common stock related to ESPP	13,026	—		804		—		—		804		Issuance of common stock related to ESPP	8,936	—		1,019		—		—		1,019
Net exercise of warrants to purchase common stock		37,073	—		3,729		—		—		3,729
Unrealized loss on available-for-sale securities		—	—		—		—		(142)		(142)

Unrealized gain on available-for-sale securities													Unrealized gain on available-for-sale securities	—	—		—		—		11		11
Net loss	Net loss	—	—		—		(39,245)		—		(39,245)		Net loss	—	—		—		(70,465)		—		(70,465)
Balance at September 30, 2020		60,052,046	$	60	$	1,715,343	$	(820,042)	$	(225)	$	895,136
Balance at September 30, 2021													Balance at September 30, 2021	61,130,687	$	61	$	1,793,384	$	(1,074,894)	$	(398)	$	718,153

Table of Contents

Three and Nine Months Ended September 30, ~~2019~~2020


		Common Stock												Common Stock
		Number of Shares	$0.001 Par Value		Additional Paid-In Capital		Accumulated Deficit		Comprehensive Loss		Total Stockholders' Equity			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, 2018		46,260,747	$	47	$	879,099	$	(586,549)	$	(560)	$	292,037
Balance at December 31, 2019													Balance at December 31, 2019	53,123,567	$	53	$	1,160,807	$	(711,407)	$	23	$	449,476
Stock-based compensation	Stock-based compensation	—	—		6,992		—		—		6,992		Stock-based compensation	—	—		6,679		—		—		6,679
Issuance of common stock, net of expense $500		6,151,163	6		248,124		—		—		248,130

Exercise of stock options	Exercise of stock options	35,919	—		766		—		—		766		Exercise of stock options	295,757	—		8,485		—		—		8,485
Vesting of restricted stock units, net of shares withheld for taxes	Vesting of restricted stock units, net of shares withheld for taxes	75,028	—		(393)		—		—		(393)		Vesting of restricted stock units, net of shares withheld for taxes	77,949	—		(472)		—		—		(472)
Issuance of common stock related to ESPP	Issuance of common stock related to ESPP	19,661	—		788		—		—		788		Issuance of common stock related to ESPP	22,647	—		860		—		—		860
Unrealized gain on available-for-sale securities, net of tax		—	—		—		—		268		268
Unrealized loss on available-for-sale securities, net of tax													Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(267)		(267)
Net loss	Net loss	—	—		—		(38,053)		—		(38,053)		Net loss	—	—		—		(50,939)		—		(50,939)
Balance at March 31, 2019		52,542,518	53		1,135,376		(624,602)		(292)		510,535
Balance at March 31, 2020													Balance at March 31, 2020	53,519,920	53		1,176,359		(762,346)		(244)		413,822
Stock-based compensation	Stock-based compensation	—	—		5,012		—		—		5,012		Stock-based compensation	—	—		7,140		—		—		7,140
Exercise of stock options	Exercise of stock options	64,174	—		1,760		—		—		1,760		Exercise of stock options	617,441	1		19,609		—		—		19,610
Vesting of restricted stock units, net of shares withheld for taxes	Vesting of restricted stock units, net of shares withheld for taxes	146,162	—		—		—		—		0		Vesting of restricted stock units, net of shares withheld for taxes	29,351	—		(663)		—		—		(663)
Unrealized gain on available-for-sale securities, net of tax	Unrealized gain on available-for-sale securities, net of tax	—	—		—		—		452		452		Unrealized gain on available-for-sale securities, net of tax	—	—		—		—		161		161
Net loss	Net loss	—	—		—		(17,862)		—		(17,862)		Net loss	—	—		—		(18,451)		—		(18,451)
Balance at June 30, 2019		52,752,854	53		1,142,148		(642,464)		160		499,897
Balance at June 30, 2020													Balance at June 30, 2020	54,166,712	54		1,202,445		(780,797)		(83)		421,619
Stock-based compensation	Stock-based compensation	—	—		5,306		—		—		5,306		Stock-based compensation	—	—		7,986		—		—		7,986
Issuance of common stock, net of expense $505													Issuance of common stock, net of expense $505	5,594,593	6		492,408		—		—		492,414
Exercise of stock options	Exercise of stock options	156,394	1		4,743		—		—		4,744		Exercise of stock options	229,763	—		8,284		—		—		8,284
Vesting of restricted stock units, net		104,217	—		(252)		—		—		(252)
Vesting of restricted stock units, net of shares withheld for taxes													Vesting of restricted stock units, net of shares withheld for taxes	10,879	—		(313)		—		—		(313)
Issuance of common stock related to ESPP	Issuance of common stock related to ESPP	13,598	—		504		—		—		504		Issuance of common stock related to ESPP	13,026	—		804		—		—		804
Net exercise of warrants to purchase common stock													Net exercise of warrants to purchase common stock	37,073	—		3,729		—		—		3,729
Unrealized loss on available-for-sale securities, net of tax	Unrealized loss on available-for-sale securities, net of tax	—	—		—				(29)		(29)		Unrealized loss on available-for-sale securities, net of tax	—	—		—		—		(142)		(142)
Net loss	Net loss	—	—		—		(45,369)		—		(45,369)		Net loss	—	—		—		(39,245)		—		(39,245)
Balance at September 30, 2019		53,027,063	$	54	$	1,152,449	(687,833)		$	131	$	464,801
Balance at September 30, 2020													Balance at September 30, 2020	60,052,046	$	60	$	1,715,343	$	(820,042)	$	(225)	$	895,136

Table of Contents

Acceleron Pharma Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2020		2019			2021		2020
Operating Activities	Operating Activities					Operating Activities
Net loss	Net loss	$	(108,635)	$	(101,283)	Net loss	$	(197,457)	$	(108,635)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	2,841		2,932		Depreciation and amortization	3,222		2,841
Stock-based compensation	Stock-based compensation	21,805		17,310		Stock-based compensation	40,526		21,805

Other non-cash items	Other non-cash items	1,552		(75)		Other non-cash items	(2,328)		1,552

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Prepaid expenses and other assets	Prepaid expenses and other assets	1,231		(3,731)		Prepaid expenses and other assets	(54,598)		1,231
Collaboration receivables (all amounts are with a related party)	Collaboration receivables (all amounts are with a related party)	(14,014)		164		Collaboration receivables (all amounts are with a related party)	(8,094)		(14,014)
Non-cash lease expense	Non-cash lease expense	4,249		3,804		Non-cash lease expense	4,849		4,249
Accounts payable	Accounts payable	6,315		1,435		Accounts payable	(3,418)		6,315
Accrued expenses	Accrued expenses	(3,025)		5,132		Accrued expenses	(795)		(3,025)

Operating lease obligations	Operating lease obligations	(4,533)		(3,214)		Operating lease obligations	(5,134)		(4,533)
Other changes in operating assets and liabilities	Other changes in operating assets and liabilities	17		(27)		Other changes in operating assets and liabilities	—		17
Net cash used in operating activities	Net cash used in operating activities	(92,197)		(77,553)		Net cash used in operating activities	(223,227)		(92,197)
Investing Activities	Investing Activities					Investing Activities
Purchases of investments	Purchases of investments	(161,741)		(379,096)		Purchases of investments	(407,580)		(161,741)
Proceeds from sales and maturities of investments	Proceeds from sales and maturities of investments	220,240		228,258		Proceeds from sales and maturities of investments	280,322		220,240
Purchases of property and equipment	Purchases of property and equipment	(3,303)		(2,166)		Purchases of property and equipment	(4,298)		(3,303)
Net cash provided by (used in) investing activities		55,196		(153,004)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(131,556)		55,196
Financing Activities	Financing Activities					Financing Activities
Proceeds from issuance of common stock from public offering, net of issuance costs	Proceeds from issuance of common stock from public offering, net of issuance costs	492,414		248,130		Proceeds from issuance of common stock from public offering, net of issuance costs	—		492,414

Net proceeds from exercises and vesting of stock awards, and ESPP contributions	Net proceeds from exercises and vesting of stock awards, and ESPP contributions	36,595		7,917		Net proceeds from exercises and vesting of stock awards, and ESPP contributions	20,086		36,595
Net cash provided by financing activities	Net cash provided by financing activities	529,009		256,047		Net cash provided by financing activities	20,086		529,009
Net increase in cash, cash equivalents and restricted cash		492,008		25,490
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(334,697)		492,008
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	239,274		145,649		Cash, cash equivalents and restricted cash at beginning of period	672,549		239,274

Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	731,282	$	171,139	Cash, cash equivalents and restricted cash at end of period	$	337,852	$	731,282
Supplemental Disclosure of Non-Cash Investing and Financing Activities:	Supplemental Disclosure of Non-Cash Investing and Financing Activities:					Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Purchase of property and equipment included in accounts payable and accrued expenses	Purchase of property and equipment included in accounts payable and accrued expenses	$	281	$	512	Purchase of property and equipment included in accounts payable and accrued expenses	$	233	$	281
Reclassification of warrant liability to additional paid-in capital		$	3,729	$	0

Additions to property and equipment for asset retirement obligation						Additions to property and equipment for asset retirement obligation	$	373	$	—
Reclassification of warrant liability to additional paid-in capital						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~~risks of relying on third parties, risks of clinical trial failures, dependence on key personnel, protection of proprietary technology, and compliance with government regulations.

On September 29, 2021, Acceleron entered into an Agreement and Plan of Merger (the Merger Agreement) with Merck Sharp & Dohme Corp., a New Jersey corporation (Merck), and Merck’s wholly owned subsidiary, Astros Merger Sub, Inc., a Delaware corporation (Purchaser). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Purchaser has commenced a tender offer (the Offer) to purchase all of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company in exchange for $180.00 per share, net to the seller in cash, without interest and less applicable tax withholdings. The closing of the Offer is subject to certain conditions, including the tender of shares representing at least a majority of the total number of Acceleron’s outstanding shares, receipt of applicable regulatory approvals, and other customary conditions. If these conditions are satisfied and the Offer closes, Merck would acquire any remaining shares by a merger of Purchaser with and into the Company.

Acceleron expects the transaction to close in the fourth quarter of 2021. If the transaction is completed, it is expected that Acceleron's common stock will be removed from listing on the Nasdaq Global Market and from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended.

For more details on the Merger Agreement, see the “Overview" section in "Part I. Financial Information - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q.

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,~~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, ~~2019,~~2020, have not changed, and the unaudited interim condensed consolidated 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.~~2020. In the opinion of management, the accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, ~~2020,~~2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020, stockholders' equity for the three and ~~2019,~~nine months ended September 30, 2021 and 2020, and its cash flows for the nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

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

The results for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020,~~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, ~~2019,~~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, ~~2019.~~2020.

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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 ~~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 1 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 September 30, ~~2020~~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 nine months ended September 30, 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 ~~in interest income~~ interest and dividends on securities classified as ~~available-for-sale.~~available-for-sale in interest income in the accompanying condensed consolidated statements of operations and comprehensive loss. Accrued interest receivable relating to the Company's available-for-sale securities is presented within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets, and amounted to $1.5 million and $0.3 million at September 30, 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.

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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 September 30, 2021 and December 31, 2020 (in thousands):

Less than 12 months
Fair Value Unrealized Losses
Corporate obligations 18,756 (1)
U.S. government agency securities 101,674 (16)
Agency bond 4,999 (1)
Total available-for sale securities in an unrealized loss position $ 125,429 $ (18)


	September 30, 2021				December 31, 2020
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate obligations	$	209,012	$	(98)	$	54,724	$	(13)
U.S. Treasury securities	12,008		(1)		72,289		(7)
Certificates of deposit	1,470		(1)		—		—
Mortgage and other asset backed securities	—		—		4,998		(2)
Total available-for sale securities in an unrealized loss position	$	222,490	$	(100)	$	132,012	$	(22)

At September 30, 2021, our security portfolio consisted of 114 securities related to investments in debt securities available-for-sale, of which 79 securities were in an unrealized loss position. There were 0no securities in an unrealized loss position for greater than 12 months as of September 30, ~~2020.~~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 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 carrying2021.

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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 0. The aggregate unrealized loss for those securities in an unrealized loss position for more than twelve months was 0. 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~~2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020									September 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

Cash and cash equivalents due in 90 days or less	Cash and cash equivalents due in 90 days or less	$	729,686	$	0	$	(1)	$	729,685	Cash and cash equivalents due in 90 days or less	$	336,456	$	—	$	—	$	336,456
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
Corporate obligations	Corporate obligations	39,162		57		(1)		39,218		Corporate obligations	289,875		16		(98)		289,793
U.S. Treasury securities	U.S. Treasury securities	113,220		8		(16)		113,212		U.S. Treasury securities	24,554		2		(1)		24,555
Certificates of deposit	Certificates of deposit	245		2		0		247		Certificates of deposit	1,716		—		(1)		1,715
Mortgage and other asset backed securities		5,000		0		(1)		4,999

Total available-for-sale securities (1)	Total available-for-sale securities (1)	$	157,627	$	67	$	(18)	$	157,676	Total available-for-sale securities (1)	$	316,145	$	18	$	(100)	$	316,063
Total cash, cash equivalents and available-for-sale securities	Total cash, cash equivalents and available-for-sale securities	$	887,313	$	67	$	(19)	$	887,361	Total cash, cash equivalents and available-for-sale securities	$	652,601	$	18	$	(100)	$	652,519

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 $ 0 $ 0 $ 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 0 493
Mortgage and other asset backed securities 12,476 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


	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 September 30, ~~2020~~2021 and December 31, ~~2019,~~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~~sheets that sum to the total of the same such amounts ~~shown~~presented in the statements of cash flows (in thousands):

September 30,
2020 2019
Cash and cash equivalents $ 729,685 $ 169,542
Restricted cash 1,597 1,597
Total cash, cash equivalents and restricted cash shown in the statement of cash flows $ 731,282 $ 171,139

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	September 30,
	2021		2020
Cash and cash equivalents	$	336,456	$	729,685
Restricted cash	1,396		1,597
Total cash, cash equivalents and restricted cash presented in the statement of cash flows	$	337,852	$	731,282

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company maintained letters of credit totaling $1.4 million and $1.6 million, respectively, held in the form of certificates of deposit and money market funds as collateral for the Company's facility lease obligation and its credit cards. Restricted cash is included within other assets in ~~our~~the condensed consolidated balance sheet.

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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, 0no allowance for credit losses has been recorded for the Company's collaboration receivables as of September 30, 2021 and December 31, 2020.

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8. Fair Value Measurements

The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input that is significant to each financial instrument as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):


		September 30, 2020									September 30, 2021
		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:	Assets:									Assets:
Money market funds	Money market funds	$	186,379	$	0	$	0	$	186,379	Money market funds	$	259,772	$	—	$	—	$	259,772
Corporate obligations	Corporate obligations	0		43,336		0		43,336		Corporate obligations	—		292,835		—		292,835
U.S. Treasury securities	U.S. Treasury securities	0		123,210		0		123,210		U.S. Treasury securities	—		35,556		—		35,556
Certificates of deposit	Certificates of deposit	0		247		0		247		Certificates of deposit	—		8,994		—		8,994
Mortgage and other asset backed securities		0		4,999		0		4,999

Total assets	Total assets	$	186,379	$	171,792	$	0	$	358,171	Total assets	$	259,772	$	337,385	$	—	$	597,157


		December 31, 2019									December 31, 2020
		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:	Assets:									Assets:
Money market funds	Money market funds	$	193,867	$	0	$	0	$	193,867	Money market funds	$	266,562	$	—	$	—	$	266,562
Corporate obligations	Corporate obligations	0		138,369		0		138,369		Corporate obligations	—		60,982		—		60,982
U.S. Treasury securities	U.S. Treasury securities	0		83,819		0		83,819		U.S. Treasury securities	—		215,310		—		215,310
Certificates of deposit	Certificates of deposit	0		493		0		493		Certificates of deposit	—		246		—		246
Mortgage and other asset backed securities	Mortgage and other asset backed securities	0		12,470		0		12,470		Mortgage and other asset backed securities	—		4,998		—		4,998
Total assets	Total assets	$	193,867	$	235,151	$	0	$	429,018	Total assets	$	266,562	$	281,536	$	—	$	548,098
Liabilities:
Warrants to purchase common stock		$	0	$	0	$	1,856	$	1,856
Total liabilities		$	0	$	0	$	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~~2021 or the year ended December 31, ~~2019.~~

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

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

Nine Months Ended September 30,
2020 2019
Beginning balance $ 1,856 $ 1,491
Change in fair value 1,873 (165)
Settlement (3,729) 0
Ending balance $ 0 $ 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 0 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,
2020 2019 2020 2019
Outstanding stock options 3,546 3,920 3,546 3,920
Common stock warrants 0 39 0 39
Shares issuable under employee stock purchase plan 19 23 19 23
Outstanding restricted stock units (1)
572 366 572 366
4,137 4,348 4,137 4,348

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	Three and Nine Months Ended September 30,
	2021		2020
Outstanding stock options	$	3,447	$	3,546
Common stock warrants	—		—
Shares issuable under employee stock purchase plan	20		19
Outstanding restricted stock units (1)	693		572
	$	4,160	$	4,137

(1)This balance is comprised of both the restricted stock units and performance-based restricted stock units described in Note ~~16.~~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 income (loss) ~~income,~~, which includes certain changes in equity that are excluded from net loss. Comprehensive loss has been disclosed in the accompanying condensed consolidated statements of operations and comprehensive loss. Accumulated other comprehensive income (loss) ~~income~~ is presented separately on the condensed consolidated balance sheets and consists entirely of unrealized ~~holding~~holdings gains ~~and~~or losses on investments as of September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

11. ~~Recent Accounting Pronouncements~~Prepaid Expenses and Other Current Assets

~~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~~Prepaid expenses and other current 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 costconsist of the ~~investment.~~ following (in thousands):


	September 30, 2021		December 31, 2020
Prepaid clinical trial expenses	$	61,816	$	7,930
Accrued interest	1,470		345
Other prepaid and current assets	8,558		8,990
Total prepaid expenses and other current assets	$	71,844	$	17,265

In 2021, prepaid clinical trial expenses increased primarily due to upfront payments made to fund the sotatercept clinical trials.

12. Commitments and Contingencies

Operating Leases

The ~~standard limits~~Company leases its facilities under non-cancelable operating leases that expire at various dates from September 2023 through May 2026. All of the ~~amount of credit losses to be recognized for available-for-sale debt securities to the amount by~~Company's leases contain escalating rent clauses, which ~~the carrying value exceeds fair value~~require higher rent payments in future years. See Note 2 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~~14 in our ~~consolidated financial statements appearing elsewhere in this Quarterly~~Annual 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~~10-K for the year ~~to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity;~~ended December 31, 2020 for additional information regarding 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, 2020 December 31, 2019 Price Per
Share Expiration September 30, 2020 December 31, 2019
Warrants to purchase common stock 0 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~~Company's operating leases.

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three and nine months ended September 30, ~~2020,~~2021. For a description of the Company's legal proceedings since September 30, 2021, see "Part II. Other Information - Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q.

Merger Agreement

In connection with the termination of the Merger Agreement under specified circumstances, including termination by Acceleron in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement), we will be required to pay Merck a termination fee of $345.0 million by wire transfer of immediately available funds. The Merger Agreement also provides that if the tender offer or merger are not consummated due to the ~~best~~failure of ~~its knowledge, no material legal proceedings are currently pending~~certain antitrust conditions to be satisfied, then Merck will be required to pay us a reverse termination fee of $650.0 million or ~~threatened.~~$750.0 million, depending on the time of termination. The termination fees, if paid, constitute the sole and exclusive remedy of the party receiving the fee in respect of the Merger Agreement.

Other

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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~~2021 and December 31, ~~2019,~~2020, or royalties on future sales of specified products. See Note 1413 for discussion of these arrangements.

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

~~14.~~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, ~~(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.~~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, ~~2019,~~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, ~~2019.~~

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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 September 30, ~~2020,~~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 September 30, ~~2020,~~2021, the Company cannot determine if it is probable that a regulatory agency will approve the applications.

~~In June~~During the three and nine months ended September 30, 2021 and 2020, the ~~European Commission, which has~~Company recognized milestone, cost-sharing, and royalty revenue pursuant to the ~~authority to approve medicines for the European Union, approved REBLOZYL based~~BMS arrangements, as presented on the ~~recommendation~~condensed consolidated statements of ~~the European Medicines Agency, or EMA, for the treatment of adult patients with transfusion-dependent anemia due to very low-, low-~~operations 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.

comprehensive loss. Through September 30, ~~2020,~~2021, under all BMS arrangements, the Company has received net cost-share payments, milestones, and royalties of ~~$234.3~~$335.3 million and ~~$44.9~~$45.1 million for REBLOZYL and sotatercept, respectively. ~~The Company recorded net collaboration revenue~~

Table 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.Contents

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 developed under the licenses. During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company ~~expensed $1.0 million~~did not recognize any expense related milestones and ~~0, respectively, and during~~fees. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company expensed ~~$3.4 million~~zero and ~~$1.6~~$1.8 million, respectively, of milestones ~~fees~~ and ~~royalties.~~fees. Milestones and fees associated with development related activities are recorded as research and development expense. During the three months ended September 30, 2021 and 2020, the Company expensed $1.6 million and $1.0 million, respectively, and during the nine months ended September 30, 2021 and 2020, the Company expensed $4.1 million and $1.6 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 September 30, ~~2020~~2021 and ~~2019,~~2020, the Company expensed ~~$0.1~~$0.6 million and $0.1 million, respectively, and during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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~~2021 and ~~2019,~~2020, the Company expensed $0.6 million ~~and~~

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~~0, respectively,~~ and during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company expensed $1.7 million of milestones and ~~0, respectively, of~~ fees, which is recorded as research and development expense.

~~15.~~14. 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.~~15. 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 ~~Equity Incentive~~ 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 and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Research and development	Research and development	$	3,794	$	2,107	$	10,194	$	7,610	Research and development	$	5,586	$	3,794	$	19,615	$	10,194
Selling, general and administrative	Selling, general and administrative	4,192		3,199		11,611		9,700		Selling, general and administrative	5,835		4,192		20,911		11,611
		$	7,986	$	5,306	$	21,805	$	17,310		$	11,421	$	7,986	$	40,526	$	21,805

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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,
2020 2019 2020 2019
Expected volatility 57.7 % 57.4 % 55.6 % 58.7 %
Expected term (in years) 6.0 6.0 6.0 6.0
Risk-free interest rate 0.4 % 1.6 % 1.4 % 2.4 %
Expected dividend yield 0 % 0 % 0 % 0 %

The following table summarizes the stock option activity under the Company’s stock option plans during the nine months ended September 30, ~~2020~~2021 (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)			Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1)
Outstanding at December 31, 2019		3,820	$	36.26	6.81
Outstanding at December 31, 2020								Outstanding at December 31, 2020	3,378	$	49.78	7.35	$	264,046
Granted	Granted	1,041	$	62.88				Granted	769	$	119.78
Exercised	Exercised	(1,143)	$	31.83				Exercised	(576)	$	41.18
Canceled or forfeited	Canceled or forfeited	(172)	$	42.71				Canceled or forfeited	(123)	$	80.33
Outstanding at September 30, 2020		3,546	$	45.19	7.42	$	238,802
Exercisable at September 30, 2020		1,843	$	37.22	6.22	$	138,783
Outstanding at September 30, 2021								Outstanding at September 30, 2021	3,448	$	65.74	7.41	$	366,668
Exercisable at September 30, 2021								Exercisable at September 30, 2021	1,722	$	45.23	6.18	$	218,481

(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.~~2021.

The aggregate intrinsic value of options exercised during the nine months ended September 30, ~~2020~~2021 was ~~$67.7~~$55.4 million.

As of September 30, ~~2020,~~2021, there was ~~$44.1~~approximately $66.7 million of unrecognized compensation expense related to unvested stock options that is expected to be recognized over a remaining weighted-average period of ~~2.61~~2.50 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~~2021 (in thousands, except per share amounts):


		Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share			Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019		397	$	39.20
Unvested balance at December 31, 2020					Unvested balance at December 31, 2020	494	$	59.16
Granted	Granted	275	67.45		Granted	269	$	119.54
Vested	Vested	(137)	38.64		Vested	(187)	$	47.69
Forfeited	Forfeited	(38)	42.80		Forfeited	(34)	$	80.46
Unvested balance at September 30, 2020		497	$	54.68
Unvested balance at September 30, 2021					Unvested balance at September 30, 2021	542	$	91.72

As of September 30, ~~2020,~~2021, there was approximately ~~$20.7~~$36.5 million of ~~related~~ unrecognized compensation ~~cost, which the Company expects~~expense related to ~~recognize~~RSUs that is expected to be recognized over a remaining weighted-average period of 1.79 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,~~2022 (the 2020 ~~none of the PSU milestones had been achieved.~~PSUs). When achievement of a milestone event becomes probable, compensation cost will be recognized from the grant date over the requisite service ~~period.~~period and a cumulative catch-up adjustment will be recorded to reflect the portion of the employees' requisite service that has been provided to date. During the nine months ended September 30, 2021, stock-based compensation expense of $2.2 million related to the 2020 PSUs was recognized for one of the milestone events deemed probable of achievement. The expense associated with these PSUs will continue to be recognized through December 31, 2022. For the remaining two milestone events which were not deemed probable of achievement, no stock-based compensation expense was recognized.

On January 29, 2021, the Company granted performance-based restricted stock units (PSU) whereby vesting depends upon the occurrence of certain milestone events by December 31, 2023 (the 2021 PSUs). When achievement of a milestone event becomes probable, compensation cost will be recognized from the grant date over the requisite service period and a cumulative catch-up adjustment will be recorded to reflect the portion of the employees' requisite service that has been provided to date. As of September 30, ~~2020, no~~2021, none of the milestone events related ~~compensation cost~~to the 2021 PSUs had been ~~recognized.~~ deemed probable of being achieved.

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The following table summarizes PSU activity under the 2013 Plan during the nine months ended September 30, ~~2020~~2021 (in thousands, except per share amounts):


��		Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2019		0	$	0
						Number of Stock Units	Weighted- Average Grant Date Fair Value Per Share
Unvested balance at December 31, 2020					Unvested balance at December 31, 2020	75	$	52.99
Granted (1)	Granted (1)	78	52.99		Granted (1)	83	$	115.53
Vested	Vested	0	0		Vested	—	$	—
Forfeited	Forfeited	(3)	52.99		Forfeited	(7)	$	76.10
Unvested balance at September 30, 2020		75	$	52.99
Unvested balance at September 30, 2021					Unvested balance at September 30, 2021	151	$	86.04

(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,~~2021, there was approximately ~~$4.0~~$10.8 million of related unrecognized compensation cost. Depending on the actual number of ~~awards earned,~~milestone events achieved, the actual expense recognized could range between 0% and 200% of ~~this amount.~~the total target value awarded on the grant date.

~~17.~~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.

~~18.~~17. Related Party Transactions

BMS

BMS owned ~~10.9%~~10.7% and ~~12.0%~~10.8% of the Company’s fully diluted equity as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Refer to Note 1413 for additional information regarding this collaboration arrangement.

During the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, all revenue recognized by the Company was recognized under the BMS collaboration arrangement.

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~~19.~~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 October 16, 2020, the Company entered into an amendment to the lease agreement for its office space at 125 Sidney Street to extend the lease term to May 31, 2026. Under the terms of this amendment, the base rental rate ranges from $65.0 thousand to $71.8 thousand per month, for a total commitment of $4.1 million during the extended lease term. The Company is currently evaluating the impact the amendment will have on its consolidated financial statements and related disclosures.disclosure.

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

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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

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

•the proposed transaction with Merck Sharp & Dohme Corp.;

•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, ACE-1334, 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~~and/or BMS's ability to, obtain and maintain regulatory approvals for our therapeutic candidates;

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

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

•our 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~~change and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and events in the industry in which we operate may differ materially from the forward-looking statements contained herein.

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

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You should also read carefully the factors described in the section “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and this 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~~pulmonary and ~~pulmonary.~~hematology.

Merger Agreement with Merck Sharp & Dohme Corp.

On September 29, 2021, we entered into an Agreement and Plan of Merger (which we refer to as the "Merger Agreement") with Merck Sharp & Dohme Corp., or Merck, and Merck's acquisition subsidiary, under which Merck is to acquire Acceleron in a cash transaction for an approximate total equity value of $11.5 billion. On October 12, 2021, pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Merck's acquisition subsidiary commenced a tender offer to purchase all of our issued and outstanding shares of common stock in exchange for $180.00 per share, net to the seller in cash, without interest and less applicable tax withholdings. The closing of the tender offer remains subject to the satisfaction of certain conditions, including the tender of shares representing at least a majority of the total number of our outstanding shares, receipt of applicable regulatory approvals, and other customary conditions. If the tender offer closes, Merck's acquisition subsidiary will be merged into Acceleron, and any remaining Acceleron shares (other than shares of common stock held by us as treasury stock, or owned by Merck or Merck's acquisition subsidiary, or held by stockholders who are entitled to demand, and who properly demand, appraisal rights under Section 262 of the General Corporation Law of the State of Delaware, or the DGCL) will be converted into the right to receive the same $180.00 per share price payable in the tender offer. The Merger Agreement contemplates that the merger will be effected pursuant to Section 251(h) of the DGCL, which permits completion of the merger without a shareholder vote promptly following consummation of the tender offer. The transaction is not subject to a financing condition.

In connection with the termination of the Merger Agreement under specified circumstances, including termination by Acceleron in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement), we will be required to pay a termination fee of $345.0 million by wire transfer of immediately available funds. The Merger Agreement also provides that if the tender offer or merger are not consummated due to the failure of certain antitrust conditions to be satisfied, then Merck will be required to pay us a reverse termination fee of $650.0 million or $750.0 million, depending on the time of termination. The termination fees, if paid, constitute the sole and exclusive remedy of the party receiving the fee in respect of the Merger Agreement.

The transaction is expected to close in the fourth quarter of 2021. If the transaction is completed, it is expected that our common stock will be removed from listing on the Nasdaq Global Market and from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended.

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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 Bristol Myers Squibb, or BMS, (which acquired Celgene Corporation in November 2019), 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.

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

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

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

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

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,~~BMS. REBLOZYL is currently approved ~~REBLOZYL for the treatment of anemia in~~to treat certain adult patients with beta-thalassemia ~~who require regular RBC transfusions. In April 2020,~~or MDS in the ~~FDA also approved REBLOZYL~~United States, European Union and Canada, as further described in the "Business" section in our Annual Report on Form 10-K 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. In September 2020, Health Canada approved REBLOZYL for the treatment of adult patients with transfusion-dependent anemia associated with beta-thalassemia.year ended December 31, 2020.

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

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We believe that there is ana global annual peak sales opportunity for REBLOZYL in excess of $2$4 billion for all currently approved indications and those 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~~including future clinical development ~~opportunities. We and BMS are evaluating luspatercept-aamt for the treatment of anemia in potential new indications that could provide additional sales opportunities.~~expansion.

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 and we plan to initiate our registrational Phase 3 trial, the STELLAR trial, in patients with PAH by year-end 2020. We also plan to initiate an early intervention Phase 3 trial, the HYPERION trial, and a later intervention Phase 3 trial, the ZENITH trial, in expanded PAH patient populations in mid-2021.

We are currently enrolling an exploratory study called SPECTRA to provide us with greater understanding of sotatercept's potential impact on PAH, with preliminary interim results expected to be presented in November 2020 at the virtual 2020 American Heart Association Scientific Sessions, and additional results expected in the first half of 2021. We also previously 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 September 30, ~~2020,~~2021, our operations have been funded primarily ~~funded~~ by $105.1 million in equity investments from venture investors, $1.3 billion from public investors, $164.1 million in equity investments from our collaboration partners and ~~$409.4~~$510.5 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners.

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, subject to any applicable restrictions in the Merger Agreement, potentially from the sale of equity, debt financings or other sources, including potential additional collaborations. However, we may not generate sufficient royalty revenue and may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to generate significant revenue or raise capital, or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our therapeutic candidates.

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

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upon our and our partners’ ability to successfully commercialize products. We expect our expenses to increase and to incur losses as we continue the development of, and seek regulatory approvals for, sotatercept in the PH field and any future therapeutic candidates, and potentially begin to commercialize any additional approved products. For a description of the numerous risks and uncertainties associated with product development, 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 September 30, ~~2020,~~2021, we have not experienced ~~a significant~~material financial, development, or supply chain ~~impact~~impacts directly related to the pandemic, but ~~have experienced some~~we may experience disruptions ~~to clinical operations with regard to timelines to complete patient enrollment~~ in our ongoing ~~Phase 2 SPECTRA trial,~~ and ~~may experience similar disruptions in our~~ planned ~~Phase 3~~ sotatercept and ACE-1334 clinical trials. We have ~~also~~ experienced disruptions in our commercialization efforts for REBLOZYL with regard to customer engagement and in-person promotion. New patient visits for MDS patients in general have also decreased as compared to pre-COVID levels. Although some restrictions on our in-person promotion efforts were reduced earlier this year, these restrictions began to return recently due to an increase in COVID cases and related hospitalizations attributed to the spread of the delta variant. In addition, as various geographies in the United States and worldwide adapt to surging COVID-19 infections from the delta variant or other new variants, we may experience additional setbacks to our operations, including our clinical trial initiations and enrollment, 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,~~I, Item 1A of the Company's ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~fiscal quarter~~year ended ~~March~~December 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. Royalty revenue is recognized in the period that the related sales occur.

Costs and Expenses

Research and Development Expenses

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

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

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

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

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

•expenses associated with obtaining and maintaining patents; and

•costs associated with preclinical activities and regulatory compliance.

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

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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 September 30, ~~2020,~~2021, we have incurred ~~$929.3 million~~$1.2 billion in research and development expenses. We plan to increase our research and development expenses for the foreseeable future as we continue the development of our TGF-beta platform therapeutic candidates, the discovery and development of preclinical therapeutic candidates, and the development of our clinical programs. 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 cost-sharing 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.~~ACE-1334. 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.~~CROs and CMOs. The only costs we track by each therapeutic candidate are external costs such as services provided to us by CROs, manufacturing of preclinical and clinical drug product by CMOs, and other outsourced research and development expenses. We do not assign or allocate to individual development programs internal costs such as salaries and benefits, facilities costs, lab supplies, and the costs of preclinical research and studies, except for luspatercept-aamt costs for the purposes of billing BMS. Our external research and development expenses during the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 are as ~~follows:~~follows (certain prior year amounts have been reclassified to conform with current year presentation):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)	2021		2020		2021		2020
Luspatercept-aamt (1)		$	808	$	1,027	$	2,154	$	3,288

Sotatercept ~~(2)~~(1)	Sotatercept ~~(2)~~(1)	13,914		3,762		31,638		11,900		Sotatercept ~~(2)~~(1)	$	22,125	$	13,914	$	60,753	$	31,638
ACE-083 ~~(3)~~(2)	ACE-083 ~~(3)~~(2)	569		11,064		7,093		21,614		ACE-083 ~~(3)~~(2)	52		569		223		7,093

ACE-1334 (3)										ACE-1334 (3)	1,962		330		4,898		3,710
Total direct research and development expenses	Total direct research and development expenses	15,291		15,853		40,885		36,802		Total direct research and development expenses	24,139		14,813		65,874		42,441
Other expenses (4)	Other expenses (4)	25,456		21,777		75,778		68,323		Other expenses (4)	35,578		25,934		107,272		74,222
Total research and development expenses	Total research and development expenses	$	40,747	$	37,630	$	116,663	$	105,125	Total research and development expenses	$	59,717	$	40,747	$	173,146	$	116,663

(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)~~(2)Development of ACE-083 ~~is being~~was discontinued. ~~We expect to incur all~~All remaining material ~~expense by~~expenses were incurred as of the end of 2020.

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

(4)Other expenses include employee and unallocated contractor-related expenses, facility expenses, lab supplies, and miscellaneous ~~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. Selling, general and administrative expenses also include directors’ fees, professional fees for accounting and legal services, other miscellaneous costs associated with supporting our sales, marketing and investor relations activities, and allocated facilities, depreciation, and other expenses, such as rent and maintenance of facilities, insurance and other supplies.

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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.

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Other Income (Expense), Net

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

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. 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.liabilities.

Critical Accounting Policies and Estimates

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

During the three and nine months ended September 30, ~~2020,~~2021, 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.~~2020. 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.~~2020.

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Results of Operations

Comparison of the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020


		Three Months Ended September 30,				Increase			Three Months Ended September 30,				Increase (Decrease)
(in thousands)	(in thousands)	2020		2019		(Decrease)		(in thousands)	2021		2020		$		%
Revenue:	Revenue:							Revenue:
Collaboration revenue:	Collaboration revenue:							Collaboration revenue:

Cost-sharing, net	Cost-sharing, net	3,298		4,208		(910)		Cost-sharing, net	$	2,156	$	3,298	$	(1,142)	(35)	%
Royalty	Royalty	19,263		—		19,263		Royalty	32,043		19,263		12,780		66	%
Total revenue (all amounts are with a related party)	Total revenue (all amounts are with a related party)	22,561		4,208		18,353		Total revenue (all amounts are with a related party)	34,199		22,561		11,638		52	%
Costs and expenses:	Costs and expenses:							Costs and expenses:
Research and development	Research and development	40,747		37,630		3,117		Research and development	59,717		40,747		18,970		47	%
Selling, general and administrative	Selling, general and administrative	21,042		15,501		5,541		Selling, general and administrative	45,112		21,042		24,070		114	%
Total costs and expenses	Total costs and expenses	61,789		53,131		8,658		Total costs and expenses	104,829		61,789		43,040		70	%
Loss from operations	Loss from operations	(39,228)		(48,923)		9,695		Loss from operations	(70,630)		(39,228)		(31,402)		80	%
Other (expense) income, net		(6)		3,520		(3,526)
Other income, net								Other income, net	180		(6)		186		(3,100)	%
Loss before income taxes	Loss before income taxes	(39,234)		(45,403)		6,169		Loss before income taxes	(70,450)		(39,234)		(31,216)		80	%
Income tax (provision) benefit		(11)		34		(45)
Income tax provision								Income tax provision	(15)		(11)		(4)		36	%
Net loss	Net loss	$	(39,245)	$	(45,369)	$	6,124	Net loss	$	(70,465)	$	(39,245)	$	(31,220)	80	%

Revenue. We recognized revenue of ~~$22.6~~$34.2 million in the three months ended September 30, ~~2020,~~2021, compared to ~~$4.2~~$22.6 million in the same period in ~~2019.~~2020. All of the revenue in both periods was derived from the BMS agreements. This ~~$18.4~~$11.6 million increase is primarily related to increased royalty revenue from REBLOZYL sales recognized in ~~2020~~2021 of ~~$19.3~~$12.8 million. As noted by our collaboration partner, net sales of REBLOZYL for the third quarter of $160 million ~~offset by decreased cost-sharing revenue~~included approximately $20 million to $25 million of sales from an inventory build due to ~~a decrease in reimbursable commercial fees, trial management fees,~~the transition to wholesaler distribution and ~~development costs~~approximately $13.5 million of ~~$0.9 million.~~net sales outside of the United States.

Research and Development Expenses. Research and development expenses were ~~$40.7~~$59.7 million in the three months ended September 30, ~~2020,~~2021, compared to ~~$37.6~~$40.7 million in the same period in ~~2019.~~2020. This ~~$3.1~~$19.0 million increase is primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:

•an increase in external clinical trial expense of $11.4 million primarily related to increased clinical activities for the sotatercept clinical trials;

•an increase in personnel and facilities-related expense of ~~$3.6~~$7.4 million related to increased headcount to support our growth;

•~~an increase in contract manufacturing, drug supply, and toxicology expenses of $0.1 million related to our ongoing clinical and preclinical programs;~~ and

•an increase in in-licensing and other miscellaneous research ~~expense~~expenses of ~~$1.1~~$2.6 million; offset by

•a decrease in ~~external~~contract manufacturing, drug supply, and development expenses of $2.4 million related to our ongoing clinical ~~trial expense of $1.7 million due to the discontinuation of our ACE-083 program, as well as decreased clinical activities for the luspatercept Phase 2 clinical trials.~~and preclinical programs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were ~~$21.0~~$45.1 million in the three months ended September 30, ~~2020,~~2021, compared to ~~$15.5~~$21.0 million in the same period in ~~2019.~~2020. The ~~$5.5~~$24.1 million increase is primarily due to the following factors:

•an increase in fees for professional services and other transaction costs of $11.6 million in connection with the Merger Agreement;

•an increase in consulting and other miscellaneous expenses of $5.2 million primarily related to the preparation for the potential future commercial launch of sotatercept and other activities related to the execution of our global strategy; and

•an increase in personnel ~~expense~~ and facilities-related expense of ~~$2.1~~$6.5 million related to increased headcount to support our ~~growth;~~

•an increase in selling expense of $2.1 million to support the launch of REBLOZYL, 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 $1.3 million.~~growth.

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~~Other Income, Net.~~ Other expense, net was $6.0 thousand in the three months ended September 30, 2020, compared to other income, net of $3.5 million for the same period in 2019. This $3.5 million decrease was primarily due to a $0.6 million decrease in sublease income, a $0.3 million decrease in the expense associated with marking the common warrant liability to market upon auto exercise in July 2020, and a $2.5 million decrease in the interest earned on our investment portfolio as a result of a decrease in the balance of our investments.

~~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 Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020


		Nine Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase (Decrease)
(in thousands)	(in thousands)	2020		2019		(Decrease)		(in thousands)	2021		2020		$		%
Revenue:	Revenue:							Revenue:
Collaboration revenue:	Collaboration revenue:							Collaboration revenue:
Milestone	Milestone	$	25,000	$	25,000	$	—	Milestone	$	—	$	25,000	$	(25,000)	(100)	%
Cost-sharing, net	Cost-sharing, net	9,800		9,655		145		Cost-sharing, net	6,812		9,800		(2,988)		(30)	%
Royalty	Royalty	31,856		—		31,856		Royalty	80,085		31,856		48,229		151	%
Total revenue (all amounts are with a related party)	Total revenue (all amounts are with a related party)	66,656		34,655		32,001		Total revenue (all amounts are with a related party)	86,897		66,656		20,241		30	%
Costs and expenses:	Costs and expenses:							Costs and expenses:
Research and development	Research and development	116,663		105,125		11,538		Research and development	173,146		116,663		56,483		48	%
Selling, general and administrative	Selling, general and administrative	59,705		40,394		19,311		Selling, general and administrative	111,646		59,705		51,941		87	%
Total costs and expenses	Total costs and expenses	176,368		145,519		30,849		Total costs and expenses	284,792		176,368		108,424		61	%
Loss from operations	Loss from operations	(109,712)		(110,864)		1,152		Loss from operations	(197,895)		(109,712)		(88,183)		80	%
Other income, net	Other income, net	1,108		9,523		(8,415)		Other income, net	466		1,108		(642)		(58)	%
Loss before income taxes	Loss before income taxes	(108,604)		(101,341)		(7,263)		Loss before income taxes	(197,429)		(108,604)		(88,825)		82	%
Income tax (provision) benefit		(31)		58		(89)
Income tax provision								Income tax provision	(28)		(31)		3		(10)	%
Net loss	Net loss	$	(108,635)	$	(101,283)	$	(7,352)	Net loss	$	(197,457)	$	(108,635)	$	(88,822)	82	%

Revenue. We recognized revenue of ~~$66.7~~$86.9 million in the nine months ended September 30, ~~2020,~~2021, compared to ~~$34.7~~$66.7 million in the same period in ~~2019.~~2020. All of the revenue in both periods was derived from the BMS agreements. This ~~$32.0~~$20.2 million increase is primarily related to increased royalty revenue from REBLOZYL sales recognized in ~~2020.~~2021 of $48.2 million, partially offset by decreased license and milestone revenue of $25.0 million.

Research and Development Expenses. Research and development expenses were ~~$116.7~~$173.1 million in the nine months ended September 30, ~~2020,~~2021, compared to ~~$105.1~~$116.7 million in the same period in ~~2019.~~2020. This ~~$11.6~~$56.5 million increase is primarily related to growth in order to support our wholly-owned therapeutic candidates and preclinical programs and includes:

•an increase in external clinical trial expense of $30.2 million related to increased clinical activities for the sotatercept clinical trials;

•an increase in personnel and facilities-related expense of ~~$7.5~~$26.5 million related to increased headcount to support our growth;

•~~an increase in contract manufacturing, drug supply and toxicology expenses of $10.9 million related to our ongoing clinical and preclinical programs;~~ and

•an increase in in-licensing and other miscellaneous research ~~expense~~expenses of ~~$2.6~~$4.2 million; offset by

•a decrease in ~~external~~contract manufacturing, drug supply, and development expenses of $4.3 million related to our ongoing clinical ~~trial expense of $9.4 million due to the discontinuation of our ACE-083 program, as well as decreased clinical activities for the luspatercept Phase 2 clinical trials.~~and preclinical programs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were ~~$59.7~~$111.6 million in the nine months ended September 30, ~~2020,~~2021, compared to ~~$40.4~~$59.7 million in the same period in ~~2019.~~2020. The ~~$19.3~~$51.9 million increase is primarily due to the following factors:

•an increase in fees for professional services and other transaction costs of $11.6 million in connection with the Merger Agreement;

•an increase in consulting and other miscellaneous expenses of $17.1 million primarily related to the preparation for the potential future commercial launch of sotatercept and other activities related to the execution of our global strategy; and

•an increase in personnel ~~expense~~ and facilities-related expense of ~~$11.9~~$22.4 million related to increased headcount to support our ~~growth;~~growth.

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•an increase in selling expense of $5.5 million to continue supporting the launch of REBLOZYL, 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 $1.9 million.~~

~~Other Income, Net.~~ Other income, net was $1.1 million in the nine months ended September 30, 2020, compared to $9.5 million for the same period in 2019. This $8.4 million decrease was primarily due to a $2.0 million decrease in the expense associated with marking the common warrant liability to market, a $0.7 million decrease in sublease income, and a $5.6 million decrease in the interest earned on our investment portfolio as a result of a decrease in the balance of our investments.

~~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 September 30, ~~2020,~~2021, we had an accumulated deficit of ~~$820.0 million.~~$1.1 billion. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and selling, general and administrative expenses will continue to increase and, as a result, we may need additional capital to fund our operations, which, subject to any applicable restrictions in the Merger Agreement, we may raise through a combination of the sale of equity, debt financings or other sources, including potential additional collaborations.

As of September 30, ~~2020,~~2021, our operations have been primarily funded by $105.1 million in equity investments from venture investors, $1.3 billion from public investors, $164.1 million in equity investments from our collaboration partners, and ~~$409.4~~$510.5 million in upfront payments, milestones, royalties, and net research and development payments from our collaboration partners.

As of September 30, ~~2020,~~2021, we had ~~$887.4~~$652.5 million in cash, cash equivalents and investments. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

In connection with the termination of the Merger Agreement under specified circumstances, including termination by Acceleron in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement), we will be required to pay Merck a termination fee of $345.0 million by wire transfer of immediately available funds. The Merger Agreement also provides that if the tender offer or merger are not consummated due to the failure of certain antitrust conditions to be satisfied, then Merck will be required to pay us a reverse termination fee of $650.0 million or $750.0 million, depending on the time of termination. The termination fees, if paid, constitute the sole and exclusive remedy of the party receiving the fee in respect of the Merger Agreement.

Cash Flows

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


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2021		2020
Net cash (used in) provided by:	Net cash (used in) provided by:					Net cash (used in) provided by:
Operating activities	Operating activities	$	(92,197)	$	(77,553)	Operating activities	$	(223,227)	$	(92,197)
Investing activities	Investing activities	55,196		(153,004)		Investing activities	(131,556)		55,196
Financing activities	Financing activities	529,009		256,047		Financing activities	20,086		529,009
Net increase in cash, cash equivalents and restricted cash		$	492,008	$	25,490
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	$	(334,697)	$	492,008

Operating Activities

Net cash used in operating activities was ~~$92.2~~$223.2 million for the nine months ended September 30, ~~2020,~~2021, compared to ~~$77.6~~$92.2 million during the same period in ~~2019.~~2020. Significant factors in this ~~$14.6~~$131.0 million increase include:

•an increase in net loss of ~~$7.4~~$88.8 million primarily due to an increase in operating expenses related to increased headcount and facilities, ~~external expenses~~prepayment of phase 3 clinical trial activities and the related expense, fees for ~~contract manufacturing,~~professional services and other transaction costs in connection with the Merger Agreement, 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 ~~$13.3~~$57.4 million, consisting primarily of an increase in prepaid expenses and other assets of $55.8 million; offset by a net decrease in collaboration receivables and accounts payable of ~~$14.2 million;~~$5.9 million and $9.7 million, respectively; and

•a net increase in other non-cash expenses of ~~$6.0~~$15.2 million, largely related to an increase in stock-based compensation expense of $18.7 million, and ~~expense associated with the remeasurement~~offset by a net decrease in amortization and accretion of ~~the fair value~~premiums and discounts on available-for-sale securities of ~~the common warrant liability upon auto-exercise in July 2020.~~$2.1 million.

Investing Activities

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Net cash ~~provided by~~used in investing activities was ~~$55.2~~$131.6 million for the nine months ended September 30, ~~2020,~~2021, compared to net cash ~~used in~~provided by investing activities of ~~$153.0~~$55.2 million during the same period in ~~2019.~~2020. Net cash used and provided by ~~and used in~~ investing activities primarily consisted of the following amounts relating to activity within our investment portfolio:

•~~for the nine months ended September 30, 2020, proceeds from maturities~~Table of ~~investments of $58.5 million net of purchases, in connection with managing our investment portfolio to meet our projected cash requirements; and~~Contents

•for the nine months ended September 30, ~~2019,~~2021, purchases of investments of ~~$150.8~~$127.3 million net of maturities 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~~July 2020 public offering in marketable ~~securities.~~securities; and

•for the nine months ended September 30, 2020, net proceeds from sales and maturities of investments of $58.5 million in connection with managing our investment portfolio to meet our projected cash requirements.

Financing Activities

Net cash provided by financing activities was ~~$529.0~~$20.1 million for the nine months ended September 30, ~~2020,~~2021, compared to ~~$256.0~~$529.0 million during the same period in ~~2019.~~2020. Net cash provided by financing activities consisted primarily of the following:

•for the nine months ended September 30, ~~2020, $492.4 million in net cash proceeds from our July 2020 public offering and the underwriter's full exercise of their option to purchase additional shares, as well as $36.6~~2021, $20.1 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 nine months ended September 30, ~~2019, $248.1~~2020, $492.4 million in net cash proceeds from our ~~January 2019~~July 2020 public offering and the underwriter's full exercise of their option to purchase additional shares, as well as ~~$7.9~~$36.6 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 expect our expenses to increase and to incur losses as we continue the development of, and seek regulatory approvals for, sotatercept in the PH field and any future therapeutic candidates, and as we begin to commercialize any approved products. We are subject to all of the risks inherent in the development of therapeutic candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

Based on our current operating plan and projections, we believe that our current cash, cash equivalents and investments, along with the 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, if needed, 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 outcome and timing of our proposed transaction with Merck;

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

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

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•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;

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

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

•the outcome, timing and cost of regulatory approvals;

•delays that may be caused by changing regulatory requirements;

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

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

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

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

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

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

Net Operating Loss (NOL) Carryforwards

We had net deferred tax assets of approximately ~~$226.0~~$282.2 million as of December 31, ~~2019,~~2020, which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. The deferred tax assets are primarily composed of federal and state tax net operating loss, or NOL, carryforwards, research and development tax credit carryforwards, and deferred revenue, accruals and other temporary differences. As of December 31, ~~2019,~~2020, we had federal NOL carryforwards of approximately ~~$666.3~~$871.4 million and state NOL carryforwards of ~~$689.8~~$788.3 million available to reduce future taxable income, if any. Of these federal and state NOL carryforwards, $438.0 million and ~~$689.4~~$787.7 million, respectively, will expire at various times through ~~2039.~~2040. The federal NOL of ~~$228.3~~$433.4 million and state NOL of ~~$0.4~~$0.6 million generated beginning in 2018 can be carried forward indefinitely. In general, if we experience a greater than ~~50 percent~~50% aggregate change in ownership of certain significant stockholders over a three-year period, or a Section 382 ownership change, utilization of our pre-change NOL carryforwards are subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state laws. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization and may be substantial. If we experience a Section 382 ownership change in connection with our public offerings or as a result of future changes in our stock ownership, some of which changes are outside our control, the tax benefits related to the NOL carryforwards may be limited or lost. For additional information about our taxes, see Note 13 to the financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Contractual Obligations and Commitments

During the three months ended September 30, ~~2020,~~2021, there were no material changes to our contractual obligations and commitments described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Recent Accounting Pronouncements

For ~~information on recent~~a summary of recently issued accounting pronouncements ~~see Note 11~~applicable to the ~~condensed consolidated financial statements appearing elsewhere~~Company refer to Note 2, "Summary of Significant Accounting Policies" in ~~this Quarterly~~the Notes to our audited Consolidated Financial Statements included in our Annual Report on Form ~~10-Q.~~10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risks

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We are exposed to market risk related to changes in interest rates. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had cash, cash equivalents and investments of ~~$887.4~~$652.5 million and ~~$453.8~~$857.5 million, respectively. Our cash equivalents are

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invested primarily in bank deposits and money market mutual funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Our investments are subject to interest rate risk and could fall in value if market interest rates increase. Due to the duration of our investment portfolio and the low risk profile of our investments, we do not believe an immediate 100 basis point change in interest rates would have a material ~~effect~~impact on the fair market value of our portfolio. We have the ability to hold our investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

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

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

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

As of September 30, ~~2020,~~2021, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC's~~Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, ~~2020,~~2021, the design and operation of our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~While we are not currently a party~~As of November 3, 2021, nine complaints had been filed by Acceleron stockholders seeking to ~~any material legal proceedings, we could become subject to legal proceedings~~enjoin the proposed transaction with Merck. Wang v. Acceleron Pharma Inc. et al., No. 1:21-cv-08430, Finger v. Acceleron Pharma Inc. et al., No. 1:21-cv-08615, Ciccotelli v. Acceleron Pharma Inc. et al, No. 1:21-cv-08639, Nagel v. Acceleron Pharma Inc. et al., No. 1:21-cv-08644, Kulish v. Acceleron Pharma Inc. et al., No. 1:21-cv-08676, and Kent v. Acceleron Pharma Inc. et al., No. 1:21-cv-08861 were filed in the ~~ordinary course~~United States District Court for the Southern District of ~~business. We do not expect any~~New York; Wilson v. Acceleron Pharma Inc. et al., No. 1:21-cv-01473 was filed in the United States District Court for the District of Delaware; Whitfield v. Acceleron Pharma Inc. et al., No. 1:21-cv-04628 was filed in the United States District Court for the Eastern District of Pennsylvania; and Combs v. Acceleron Pharma Inc. et al., No. 1:21-cv-05874 was filed in the United States District Court for the Eastern District of New York. The complaints name as defendants Acceleron and the members of our board of directors, and the complaint in the Ciccotelli action also names Merck and Merck's acquisition subsidiary as defendants. The complaints assert claims under the federal securities laws in connection with the Schedule 14D-9 that we filed with the SEC on October 12, 2021, alleging that the document contains materially incomplete and misleading information. The complaints seek, among other relief, injunctive relief to prevent consummation of the transactions contemplated by the Merger Agreement until the alleged disclosure violations are cured, as well as damages and attorneys’ fees and costs.

The defendants believe that these actions are without merit, and intend to defend vigorously against such ~~potential items~~claims. Additional lawsuits arising out of or relating to ~~have a significant impact on our financial position.~~the Merger Agreement or the proposed acquisition of us by Merck may be filed in the future.

Item 1A. Risk Factors

~~There~~Except as described below, 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~~2020.

Risks Related to our Pending Transaction with Merck

We may not complete the pending transaction with Merck within the time frame we anticipate, or at all, which could have an adverse effect on our business, financial results and/or operations.

The completion of the transaction is subject to the conditions set forth in the Merger Agreement, including (1) that at least a majority of the shares of our outstanding common stock having been validly tendered into and not withdrawn from the tender offer, (2) receipt of certain regulatory approvals, including the expiration or early termination of the applicable waiting period (or any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (3) the accuracy of certain of our representations and warranties in the Merger Agreement, (4) our compliance with certain covenants contained in the Merger Agreement, subject to qualifications, (5) the absence of a “Company Material Adverse Effect” (as defined in the Merger Agreement), and (6) other customary conditions. In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, a change in the recommendation of our Board of Directors or a termination of the Merger Agreement by us to enter into an agreement for a Superior Proposal (as that term is defined in the Merger Agreement). As a result, we cannot assure you that the transaction with Merck will be completed, or that, if completed, it will be on the terms set forth in the Merger Agreement or within the expected time frame.

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If the transaction is not completed within the expected time frame or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices of our common stock reflect a market assumption that the transaction will be completed. We could be required to pay Merck a termination fee of $345.0 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement. The failure to complete the transaction also may result in negative publicity and negatively affect our relationship with our stockholders, employees, collaborators, customers, regulators and other business partners. We may also be required to devote significant time and resources to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement.

The pendency of the transaction with Merck could adversely affect our business, financial results and/or operations.

Our efforts to complete the transaction could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the transaction will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following consummation of the transaction. A substantial amount of our management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with collaborators, vendors, customers, regulators and other business partners. Changes to or termination of existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

While the Merger Agreement is in effect, we are subject to restrictions on our business activities.

The Merger Agreement includes restrictions on the conduct of our business prior to the completion of the merger, generally requiring us to use commercially reasonable efforts to carry on our business in the ordinary course. Without limiting the generality of the foregoing, we are subject to a variety of specified restrictions. Unless we obtain Merck's prior written consent (which consent may not be unreasonably withheld, conditioned or delayed) and except (i) as expressly permitted by the Merger Agreement, (ii) as required by applicable law, (iii) as set forth in the confidential disclosure letter delivered by Acceleron to Merck, or (iv) for certain specified measures that may be taken in connection with or in response to the COVID-19 pandemic, we may not, among other things and subject to certain exceptions and aggregate limitations, incur additional indebtedness, issue additional shares of our common stock outside of our equity incentive plans, repurchase our common stock, pay dividends, acquire assets, securities or property, dispose of businesses or assets, enter into material contracts or make certain additional capital expenditures. We may find that these and other contractual restrictions in the Merger Agreement delay or prevent us from responding, or limit our ability to respond, effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management believes they may be advisable. If any of these effects were to occur, it could materially and adversely impact our operating results, financial position, cash flows and/or the price of our common stock.

In certain instances, the Merger Agreement requires us to pay a termination fee to Merck, which could require us to use available cash that would have otherwise been available for general corporate purposes.

If the Merger Agreement is terminated under certain circumstances, including termination by Acceleron in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement), we will be required to pay Merck a termination fee of $345.0 million by wire transfer of immediately available funds. If the Merger Agreement is terminated under such circumstances, we may be required to pay such termination fee using available cash that would have otherwise been available for general corporate purposes and other uses. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business operations and financial condition, which in turn would materially and adversely affect the price of our common stock.

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Lawsuits have been filed against us and other lawsuits may be filed against us and/or Merck challenging the transactions contemplated by the Merger Agreement. An adverse ruling in any such lawsuit may delay or prevent the proposed acquisition from being completed.

As of November 3, 2021, nine complaints had been filed by Acceleron stockholders seeking to enjoin the proposed transaction with Merck. Wang v. Acceleron Pharma Inc. et al., No. 1:21-cv-08430, Finger v. Acceleron Pharma Inc. et al., No. 1:21-cv-08615, Ciccotelli v. Acceleron Pharma Inc. et al, No. 1:21-cv-08639, Nagel v. Acceleron Pharma Inc. et al., No. 1:21-cv-08644, Kulish v. Acceleron Pharma Inc. et al., No. 1:21-cv-08676, and Kent v. Acceleron Pharma Inc. et al., No. 1:21-cv-08861 were filed in the United States District Court for the Southern District of New York; Wilson v. Acceleron Pharma Inc. et al., No. 1:21-cv-01473 was filed in the United States District Court for the District of Delaware; Whitfield v. Acceleron Pharma Inc. et al., No. 1:21-cv-04628 was filed in the United States District Court for the Eastern District of Pennsylvania; and Combs v. Acceleron Pharma Inc. et al., No. 1:21-cv-05874 was filed in the United States District Court for the Eastern District of New York. The complaints name as defendants Acceleron and the ~~Company's Quarterly Report~~members of our board of directors, and the Ciccotelli action also names Merck and Merck's acquisition subsidiary as defendants. The complaints assert claims under the federal securities laws in connection with the Schedule 14D-9 that we filed with the SEC on ~~Form 10-Q~~October 12, 2021, alleging that the document contains materially incomplete and misleading information. The complaints seek, among other relief, injunctive relief to prevent consummation of the transactions contemplated by the Merger Agreement until the alleged disclosure violations are cured, as well as damages and attorneys’ fees and costs.

The defendants believe that these actions are without merit, and intend to defend vigorously against such claims. Additional lawsuits arising out of or relating to the Merger Agreement and/or the proposed acquisition of us by Merck may be filed in the future. There can be no assurances that we will be successful in the outcome of any potential future lawsuits challenging the acquisition. One of the conditions to completion of the proposed acquisition is the absence of any applicable injunction or other order being in effect that prohibits completion of the proposed acquisition. Accordingly, if a plaintiff is successful in obtaining an injunction, then such order may prevent the proposed acquisition from being completed, or from being completed within the expected timeframe.

We have incurred, and will continue to incur, direct and indirect costs as a result of the pending transaction with Merck.

We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the ~~fiscal quarter ended March 31, 2020.~~pending transaction with Merck. We must pay substantially all of these costs and expenses whether or not the transaction is completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.

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Item 6. Exhibits


Exhibit Number	Description of Exhibit
2.1+	Agreement and Plan of Merger, dated as of September 29, 2021, by and among Acceleron Pharma Inc., Merck Sharp & Dohme Corp. and Astros Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (001-36065), filed on September 30, 2021)

10.1#	Amendment to the Employment Agreement between Habib Dable and Acceleron Pharma Inc., dated as of September 29, 2021

10.2#	Amendment to the Employment Agreement between Jay Backstrom and Acceleron Pharma Inc., dated as of September 29, 2021

10.3#	Amendment to the Employment Agreement between Sujay Kango and Acceleron Pharma Inc., dated as of September 29, 2021

10.4#	Amendment to the Employment Agreement between Kevin McLaughlin and Acceleron Pharma Inc., dated as of September 29, 2021

10.5#	Amendment to the Employment Agreement between Adam Veness and Acceleron Pharma Inc., dated as of September 29, 2021

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~~ 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)

+ Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

# Management contract or compensatory plan or arrangement.

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

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SIGNATURES

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


	ACCELERON PHARMA INC.

Date: November ~~5, 2020~~4, 2021	By:	/s/ HABIB J. DABLE
		Habib J. Dable
		Chief Executive Officer and President

Date: November ~~5, 2020~~4, 2021	By:	/s/ KEVIN F. MCLAUGHLIN
		Kevin F. McLaughlin
		Senior Vice President, Chief Financial Officer and Treasurer

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	Less than 12 months
	Fair Value		Unrealized Losses
Corporate obligations	18,756		(1)
U.S. government agency securities	101,674		(16)
Agency bond	4,999		(1)
Total available-for sale securities in an unrealized loss position	$	125,429	$	(18)