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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from to

Commission File Number: 001-38584

CONSTELLATION PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-1741721
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

215 First Street, Suite 200 Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip code)

(617) 714-0555

(Registrant’s telephone number, including area code)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.0001 par value per share

CNST

Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

As of April 30, 2021, the registrant had 47,914,690 shares of common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of management and expected market growth are forward-looking statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Risk Factors” and include, among other things:

•

our ongoing clinical trials, including our Phase 3 and 2 clinical trials of pelabresib (CPI-0610), MANIFEST-2 and MANIFEST, respectively and our Phase 1/2 clinical trial of CPI-0209;

•

our plans to advance our clinical-stage product candidates into later stage trials;

•

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

•

our plans to develop and, if approved, subsequently commercialize pelabresib, CPI-0209 and any other product candidates, including in combination with other drugs and therapies;

•

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for pelabresib, CPI-0209 and other product candidates;

•

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and marketable securities;

•

the potential advantages of our product candidates;

•

our estimates regarding the potential market opportunity for our product candidates;

•

our manufacturing, commercialization and marketing capabilities and strategy;

•

our intellectual property position;

•

our ability to identify products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

•

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and needs for additional financing;

•

the impact of government laws and regulations;

•

our competitive position;

•

developments relating to our competitors and our industry;

•

our ability to maintain and establish collaborations or obtain additional funding; and

•

the impact of the COVID-19 pandemic on our ability to initiate sites and enroll and monitor patients in our clinical trials, collect data, secure needed supplies, initiate new clinical trials, meet our current milestones and timeline, and continue to successfully execute on our plans and operations.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section entitled “Risk Factors” that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Risk Factor Summary:

•

We have incurred significant operating losses since our inception. Our net loss was $40.1 million for the three months ended March 31, 2021, $126.4 million for the year ended December 31, 2020. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

•

The ongoing COVID-19 pandemic has affected, and may continue to affect, our ability to conduct our clinical trials, including delays in site initiation and patient enrollment as well as incomplete data collection at some sites. It may also disrupt regulatory activities or have other adverse effects on our business and operations.

•

Our approach to the discovery and development of product candidates based on the inhibition of epigenetic regulators by small molecules is an emerging field and the scientific discoveries that form the basis for our efforts to discover and develop product candidates are relatively new. We do not know whether we will be able to successfully develop any products.

•

We have product candidates in clinical development and preclinical development. The risk of failure for each of our product candidates is high. Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

•

If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

•

We are currently pursuing the development of pelabresib in combination with ruxolitinib, which is marketed by Incyte, Inc. If the FDA revokes approval of ruxolitinib or any other therapeutic that we develop product candidates in combination with, or if safety, efficacy, manufacturing or supply issues arise with ruxolitinib or any therapeutic that we use in combination with one of our product candidates in the future, we may be unable to further develop and/or market our product candidate or we may experience significant regulatory delays or supply shortages, and our business could be materially harmed.

•

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for any of our product candidates, if approved, may be smaller than we estimate.

•

We face substantial competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•

We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates, and those third parties may not perform satisfactorily, which could have a material adverse effect on our ability to complete clinical trials or commercialize our product candidates.

•

We may enter into collaborations with third parties for the development or commercialization of our product candidates. If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates and our business could be adversely affected.

•

If we are unable to obtain, maintain, enforce and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

•

The price of our common stock is volatile and fluctuates substantially, which could result in substantial losses for our stockholders.

•

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gain.

Constellation Pharmaceuticals, Inc.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months Ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) For the Three Months Ended March 31, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2021 and 2020	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65

Signatures		66

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	113,983		$	163,693
Marketable securities		268,097			257,755
Prepaid expenses and other current assets		7,868			7,161
Total current assets		389,948			428,609
Property and equipment, net		1,667			1,497
Restricted cash		3,233			3,233
Operating lease, right-of-use assets		2,811			3,541
Other assets		5,000			4,974
Total assets	$	402,659		$	441,854

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	4,519		$	9,853
Accrued expenses and other current liabilities		17,456			17,051
Current portion of lease liabilities - operating lease		3,365			3,644
Total current liabilities		25,340			30,548
Operating lease liabilities, net of current portion		—			582
Total liabilities		25,340			31,130
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued or outstanding at March 31, 2021 and December 31, 2020, respectively		—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2021 and December 31, 2020; 47,913,147 and 47,744,486 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		5			5
Additional paid-in capital		863,132			856,460
Accumulated other comprehensive gain (loss)		(2	)		3
Accumulated deficit		(485,816	)		(445,744	)
Total stockholders' equity		377,319			410,724
Total liabilities and stockholders' equity	$	402,659		$	441,854

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Operating expenses:
Research and development	$	30,784		$	20,075
General and administrative		9,442			5,908
Total operating expenses		40,226			25,983
Loss from operations		(40,226	)		(25,983	)
Other income (expense):
Interest income		154			1,404
Interest expense		—			(850	)
Total other income (expense), net		154			554
Loss before income taxes		(40,072	)		(25,429	)
Income tax expense		—			15
Net loss	$	(40,072	)	$	(25,444	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.84	)	$	(0.61	)
Weighted average number of common shares used in net loss per share attributable to common stockholders, basic and diluted		47,838,738			41,765,635
Comprehensive loss:
Net loss	$	(40,072	)	$	(25,444	)
Other comprehensive loss:
Unrealized loss on marketable securities		(5	)		(84	)
Total other comprehensive loss	$	(5	)	$	(84	)
Comprehensive loss	$	(40,077	)	$	(25,528	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

(Unaudited)

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balances at December 31, 2020		47,744,486	$	5	$	856,460	$	3		$	(445,744	)	$	410,724
Stock-based compensation expense		—		—		5,437		—			—			5,437
Exercise of common stock warrants		14,165		—		—		—			—			—
Stock option exercises		154,496		—		1,235		—			—			1,235
Unrealized loss on marketable securities		—		—		—		(5	)		—			(5	)
Net loss		—		—		—		—			(40,072	)		(40,072	)
Balances at March 31, 2021		47,913,147	$	5	$	863,132	$	(2	)	$	(485,816	)	$	377,319

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balances at December 31, 2019		41,719,039	$	4	$	656,973	$	(6	)	$	(319,387	)	$	337,584
Stock-based compensation expense		—		—		2,559		—			—			2,559
Stock option exercises		103,025		—		911		—			—			911
Unrealized loss on marketable securities		—		—		—		(84	)		—			(84	)
Net loss		—		—		—		—			(25,444	)		(25,444	)
Balances at March 31, 2020		41,822,064	$	4	$	660,443	$	(90	)	$	(344,831	)	$	315,526

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONSTELLATION PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(40,072	)	$	(25,444	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		202			147
Stock-based compensation expense		5,437			2,559
Non-cash interest expense		—			202
Amortization and accretion on marketable securities		370			(156	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(707	)		238
Operating lease, right-of-use assets		824			642
Accounts payable		(5,386	)		(3,720	)
Accrued expenses and other current liabilities		575			60
Operating lease liabilities		(955	)		(558	)
Other assets		(26	)		—
Net cash used in operating activities		(39,738	)		(26,030	)
Cash flows from investing activities:
Purchase of marketable securities		(123,118	)		(135,161	)
Purchases of property and equipment		(490	)		(38	)
Proceeds from maturities and sales of marketable securities		112,401			16,450
Net cash used in investing activities		(11,207	)		(118,749	)
Cash flows from financing activities:
Proceeds from issuance of common stock upon stock option exercises		1,235			911
Net cash provided by financing activities		1,235			911
Net decrease in cash, cash equivalents and restricted cash		(49,710	)		(143,868	)
Cash, cash equivalents and restricted cash at beginning of period		166,926			334,757
Cash, cash equivalents and restricted cash at end of period	$	117,216		$	190,889

Supplemental disclosure of cash flow information:
Interest paid	$	—		$	648
Supplemental disclosure of noncash investing and financing information:
Purchases of property and equipment included in accounts payable and accrued expenses	$	106		$	5

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CONSTELLATION PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Nature of the Business and Basis of Presentation

Constellation Pharmaceuticals, Inc. (“Constellation” or the “Company”) is a clinical-stage biopharmaceutical company using its expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with cancers associated with abnormal gene expression or drug resistance. The Company was incorporated in January 2008 as EpiGenetiX, Inc. under the laws of the State of Delaware. On March 31, 2008, the Company changed its name to Constellation Pharmaceuticals, Inc.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations with the proceeds of sales of convertible preferred stock, payments received in connection with collaboration agreements, borrowings under loan agreements, and proceeds from sales of its common stock in public and private offerings.

The Company has incurred losses since inception, including net losses of $40.1 million for the three months ended March 31, 2021, and $126.4 million for the year ended December 31, 2020. As of March 31, 2021, the Company had an accumulated deficit of $485.8 million. The Company expects to continue to generate operating losses in the foreseeable future. Based on the Company’s current operating plan, the Company expects that its cash, cash equivalents and marketable securities at March 31, 2021, will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the interim financial statements. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding sooner than would otherwise be expected. There can be no assurance that the Company will be able to obtain additional funding on acceptable terms, if at all.

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

2. Summary of Significant Accounting Policies

Unaudited Interim Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim consolidated financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of Constellation Pharmaceuticals, Inc. and its wholly owned subsidiary, Constellation Securities Corporation. All intercompany transactions and balances of the subsidiary have been eliminated in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2021, and results of operations for the three months ended March 31, 2021 and 2020, stockholders’ equity for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020 have been made. The Company’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Concentrations of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains most of its cash, cash equivalents and marketable securities at two accredited financial institutions in amounts that exceed federally insured limits. Cash equivalents are invested in an institutional money market fund. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual Report other than as noted below.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consists of highly liquid investments that are readily convertible into cash with original maturities of three months or less from the date of purchase. The Company has a policy of making investments only in government securities or with commercial institutions that have at least an investment grade credit rating.

As of March 31, 2021, the Company classified $3.2 million as restricted cash related to a letter of credit issued as a security deposit in connection with Company's lease of its corporate office facilities (See Note 10). Cash, cash equivalents and restricted cash consists of the following (in thousands):

	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	113,983	$	163,693
Restricted cash		3,233		3,233
Cash, cash equivalents and restricted cash	$	117,216	$	166,926

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

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

•

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, or ASU 2019-12, which includes amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, or ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by

clarifying and amending existing guidance. The new guidance is effective for the Company for annual periods beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. Early adoption of the amendments was permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial position, results of operations or cash flows.

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	113,983	$	—	$	—	$	113,983
	$	113,983	$	—	$	—	$	113,983
Marketable securities:
Corporate debt securities	$	—	$	46,342	$	—	$	46,342
Commercial paper		—		126,185		—		126,185
U.S. Government debt securities		—		95,570		—		95,570
Total	$	—	$	268,097	$	—	$	268,097

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	163,693	$	—	$	—	$	163,693
	$	163,693	$	—	$	—	$	163,693
Marketable securities:
Corporate debt securities	$	—	$	52,531	$	—	$	52,531
Commercial paper		—		99,865		—		99,865
U.S. Government debt securities		—		105,359		—		105,359
Total	$	—	$	257,755	$	—	$	257,755

Money market funds were valued by the Company using observable inputs that reflect quoted prices for identical assets in active markets. The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments and some cash equivalents within Level 2 of the fair value hierarchy.

During the three months ended March 31, 2021, there were no transfers between Level 1 and Level 2.

4. Marketable Securities

The following table summarizes the Company’s marketable securities as of March 31, 2021, and December 31, 2020, respectively (in thousands):

	March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Marketable securities:
Corporate debt securities	$	46,361	$	—	$	(19	)	$	46,342
Commercial paper		126,185		—		—			126,185
U.S. Government debt securities		95,553		17		—			95,570
Total marketable securities	$	268,099	$	17	$	(19	)	$	268,097

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Marketable securities:
Corporate debt securities	$	52,529	$	6	$	(4	)	$	52,531
Commercial paper		99,865		—		—			99,865
U.S. Government debt securities		105,358		6		(5	)		105,359
Total marketable securities	$	257,752	$	12	$	(9	)	$	257,755

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Accrued employee compensation and benefits	$	2,278	$	5,545
Accrued external research and development expenses		14,471		10,698
Accrued professional fees		532		467
Other		175		341
	$	17,456	$	17,051

6. Collaboration Agreement

The Company has a collaboration agreement (the “LLS Agreement”) with the Leukemia and Lymphoma Society, (“LLS”) pursuant to which LLS committed to provide funding to the Company for research and development services, conditional on (i) the achievement of milestones in accordance with the LLS Agreement and (ii) equal funding being provided by the Company. Through December 31, 2020, the Company received funding totaling $7.3 million from LLS upon the achievement of specified milestones, which were recorded as a reduction of research and development expense. There was no additional funding received in the three months ended March 31, 2021.

The LLS Agreement requires the Company to make payments to LLS upon the Company’s achievement of specified milestones that could total up to $25.0 million in aggregate (see Note 11).

7. Debt

On March 20, 2019, the Company entered into a loan agreement with Hercules (the “Loan Agreement”), under a term loan facility, pursuant to which the Company could borrow up to $40.0 million. The Company had borrowed $30.0 million under the Loan Agreement. The term loan bore interest at an annual rate equal to the greater of 8.55% and the prime rate of interest plus 2.55%. The Loan Agreement provided for interest-only payments until April 30, 2021, and repayment of the aggregate outstanding principal balance of the term loan in monthly installments starting on May 1, 2021 and continuing through April 1, 2023 (the “Maturity Date”). In addition, the Company paid a fee of $0.3 million upon closing and were required to pay a fee of 6.35% of the aggregate advances under the Loan Agreement at maturity.

On November 3, 2020, the Company repaid in full all principal, accrued and unpaid interest, fees, costs and expenses owed under the Loan Agreement, in an aggregate amount of approximately $32.2 million.

8. Equity

Preferred Stock

The Company has authorized preferred stock amounting to 5,000,000 shares as of March 31, 2021 and December 31, 2020, respectively. The authorized preferred stock was classified under stockholders’ equity at March 31, 2021 and December 31, 2020.

Common Stock

As of March 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 shares of common stock, $0.0001 par value per share.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the Company’s board of directors. No dividends have been declared or paid by the Company since its inception.

At-the-Market Offering

In August 2019, the Company entered into an Open Market Sale Agreement^SM (the “Open Market Sales Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies may offer and sell, from time to time, shares of common stock having aggregate gross proceeds of up to $50.0 million. At its option, the Company may sell shares of common stock through Jefferies as its sales agent, with any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or in other transactions pursuant to an effective shelf registration statement on Form S-3. The Company agreed to pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the Sales Agreement. During the three months ended March 31, 2021, the Company did not sell any shares under the Sales Agreement.

Warrants to Purchase Common Stock

The Company has outstanding warrants to purchase common stock as follows:

				Number of Common Shares Issuable under Warrant as of
Issuance Date	Term (in years)	Exercise Price		March 31, 2021		December 31, 2020
May 23, 2011	10	$	1.55		16,708		31,761
June 28, 2013	10	$	13.22		7,569		7,569
September 30, 2014	10	$	13.22		15,139		15,139
					39,416		54,469

In March 2021, the holders of such warrants completed a cashless exercise of the warrants, resulting in the Company’s issuance of 14,165 shares of common stock, whereby 888 shares of common stock were withheld by the Company to pay for the exercise price of the warrants.

9. Stock-Based Compensation

2018 Equity Incentive Plan

In June 2018, the Company’s stockholders approved the 2018 Plan, which became effective on July 18, 2018. The 2018 Plan provides for the grant of incentive stock options, non-qualified options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan was 3,025,101. The number of shares reserved shall be annually increased on January 1, 2019 and each January 1 thereafter through January 1, 2028 by the least of (i) 2,216,368 shares, (ii) 4% of the number of shares of the Company’s common stock outstanding on the first day of the year or (iii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that are expired, forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2018 Plan or any predecessor plan such as the 2008 Equity Incentive Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. In January 2021, the shares available for issuance under the 2018 Plan were increased by 1,909,779 shares pursuant to the annual increase described above. As of March 31, 2021, 2,189,502 shares remained available for future issuance under the 2018 Plan.

2018 Employee Stock Purchase Plan

In June 2018, the Company’s stockholders approved the 2018 Employee Stock Purchase Plan which became effective on July 18, 2018. A total of 272,504 shares of common stock were reserved for issuance under this plan. The number of shares reserved shall be annually increased on each January 1 through January 1, 2028 by the least of (i) 545,008 shares, (ii) 1% of the number of shares of the Company’s common stock outstanding on the first day of the year or (iii) an amount determined by the Company’s board of directors. In January 2021, the shares available for issuance under the 2018 Plan were increased by 477,445 shares pursuant to the annual increase described above. As of March 31, 2021, no offering periods have commenced, and 1,167,139 shares remained available for future issuance under the 2018 Plan.

Stock Option Issuances

The following is a summary of stock option activity for the three months ended March 31, 2021:

				Weighted		Weighted
				Average		Average		Aggregate
	Number			Exercise		Contractual		Intrinsic
	of Shares			Price		Term		Value
						(in years)		(in thousands)
Outstanding as of December 31, 2020		5,330,917		$	16.68		8.06	$	74,259
Granted		1,503,006		$	34.49
Exercised		(154,496	)	$	8.00
Forfeited		(51,213	)	$	10.76
Outstanding as of March 31, 2021		6,628,214		$	20.97		8.32	$	50,093
Vested and expected to vest as of March 31, 2021		6,628,214		$	20.97		8.32	$	50,093
Options exercisable as of March 31, 2021		2,332,731		$	11.56		7.21	$	31,446

During the three months ended March 31, 2021, the Company granted options to employees for the purchase of 1,503,006 shares of common stock with a weighted average exercise price of $34.49 per share and a weighted average grant-date fair value of $22.76 per share.

The Company estimated the fair value of each stock option award using the Black-Scholes option-pricing model based on the following assumptions:

	Three Months Ended March 31,
	2021			2020
Risk-free interest rate		0.74	%		1.46	%
Expected volatility		76.22	%		82.17	%
Expected dividend yield		—			—
Expected term (in years)		6.07			6.06

As of March 31, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $70.5 million, which is expected to be recognized over a weighted average period of 3.2 years.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its statements of operations and comprehensive loss (in thousands):

	Three Months Ended March 31,
	2021		2020
Research and development expenses	$	2,265	$	1,006
General and administrative expenses		3,172		1,553
Total	$	5,437	$	2,559

10. Leases

The Company has leases for office and laboratory space. The Company occupies approximately 47,546 square feet of office and laboratory space in Cambridge, Massachusetts under a lease (the “Current Lease) that originally expired June 30, 2023.

In November 2020, the Company executed a lease in Watertown, Massachusetts for approximately 79,155 square feet of office and laboratory space (the “New Lease”), which is expected to commence in or around December 2021 upon the Company taking control of the asset. The New Lease has a term of 10 years. The Company has the option to extend the term by five years. The base rent is $5.6 million per year, subject to an increase of 3.0%, and the Company is subject to reduced rent for the first nine months. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. In connection with the facility lease, the Company has secured a letter of credit for $2.8 million which renews automatically each year. Since the Company does not expect to obtain the control of the premises until December 2021, the Company determined that the lease commencement date, for accounting purposes, was not reached and therefore the lease is not included in the Company’s operating lease right-of-use asset or operating lease liabilities as of March 31, 2021.

In connection with entering into the New Lease, in November 2020, the Company also executed an amendment to update the term of the Current Lease to terminate 60 days after the commencement date of the New Lease.

The Company determined that these leases are operating leases.

11. Commitments and Contingencies

Research Agreements

The LLS Agreement requires the Company to make certain milestone payments to LLS, that could total up to $25.0 million in the aggregate, upon the receipt of payments by the Company associated with the licensing or transfer of rights to the related compound (or a product) to a third party, upon first regulatory approval of a product in the U.S., or upon the first regulatory approval of a product in Europe or Japan. As of March 31, 2021, and December 31, 2020, no events have occurred that would require payment of the milestones.

The Company has several in-license agreements with academic organizations. The Company is obligated to pay annual license maintenance fees of less than $0.1 million per year as well as reimburse certain institutions for costs incurred related to the filing, prosecution and maintenance of patent rights licensed under the agreements. In addition, the Company may be obligated to pay contingent milestone payments of up to a maximum of $15.7 million upon the achievement of certain defined events as well as royalties of low single-digit percentages of sales of licensed products. In certain cases, the maximum payments to the academic organizations are capped. If the Company grants any sublicense rights under the license agreements, the Company has agreed to pay a percentage of sublicense fees received by the Company to the licensors. As of March 31, 2021, and December 31, 2020, no events have occurred that would require payment of the milestones, royalties, or sublicense fees.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its financial statements as of March 31, 2021 or December 31, 2020.

Legal Proceedings

The Company is not a party to any material legal proceedings and did not have contingency reserves established for any litigation liabilities as of March 31, 2021 or December 31, 2020.

12. Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2021			2020
Numerator:
Net loss	$	(40,072	)	$	(25,444	)
Net loss attributable to common stockholders	$	(40,072	)	$	(25,444	)

Denominator:
Weighted average common shares outstanding, basic and diluted		47,838,738			41,765,635

Net loss per share attributable to common stockholders, basic and diluted	$	(0.84	)	$	(0.61	)

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

	March 31,
	2021		2020
Warrants for the purchase of common stock		39,416		84,576
Options to purchase common stock		6,628,214		4,915,393
Total		6,667,630		4,999,969

13. Retirement Plan

The Company has a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. As currently established, the Company is not required to make contributions to the 401(k) Plan. The Company made matching contributions of $0.3 million and $0.2 million for each of the three months ended March 31, 2021 and 2020, respectively.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the Risk Factors section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company using our expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with cancers associated with abnormal gene expression or drug resistance. Our integrated epigenetics platform enables us to validate targets and generate small molecules impacting these targets to selectively modulate gene expression in tumor and immune cells to drive anti-tumor activity. We have used our epigenetics platform to discover and design our wholly owned product candidates, pelabresib (CPI-0610), which inhibits the function of bromodomain and extra terminal domain (“BET”), proteins, CPI-0209, which inhibits the enzymatic function of enhancer of zeste homolog 2 (“EZH2”) protein, and CPI-482, which inhibits the function of the lysine-specific demethylase 1 (“LSD1”) protein. We believe that our approach to targeting the central gene regulatory mechanisms associated with cancer proliferation may enable us to provide therapeutic benefits to cancer patients. Our vision is to become a fully integrated pharmaceutical company with a broad pipeline of hematology and oncology development and discovery programs.

Pelabresib (CPI-0610) – BET Inhibitor

Our lead product candidate, pelabresib, is a small molecule designed to promote anti-tumor activity by specifically inhibiting the bromodomain function of BET proteins, which normally enhance target gene expression. We are currently conducting two clinical trials of pelabresib. We are enrolling patients and initiated dosing in MANIFEST-2, a global, double-blinded, randomized pivotal Phase 3 clinical trial with pelabresib in combination with ruxolitinib (marketed as Jakafi®/Jakavi®) versus placebo with ruxolitinib in Janus kinase 1/2 (“JAK”)-inhibitor-naïve patients with myelofibrosis (“MF”) who have splenomegaly and symptoms requiring therapy. We plan to enroll approximately 310 JAK-inhibitor-naïve patients. Patients are randomized 1:1 to the pelabresib with ruxolitinib arm or the placebo with ruxolitinib arm. The primary endpoint of the trial is the proportion of patients who achieve a 35% or greater reduction in spleen volume from baseline (referred to as “SVR35”) after 24 weeks of treatment. A key secondary endpoint of the trial is the proportion of patients who achieve a 50% or greater improvement in Total Symptom Score from baseline (referred to as “TSS50”) after 24 weeks of treatment. Based on our prior discussions with the FDA regarding MANIFEST-2, we believe we need to meet both of these endpoints. The trial protocol includes a mechanism to re-estimate the sample size to ensure sufficient power for both the primary and the key secondary endpoints. Other endpoints include bone marrow fibrosis grade improvements, duration of transfusion independence, rate of red-blood-cell transfusion for the first 24 weeks, and hemoglobin response.

Additionally, we are continuing to enroll patients in the second line arms of MANIFEST, our ongoing open-label Phase 2 clinical trial of pelabresib both as a monotherapy and in combination with ruxolitinib in patients with MF. In this trial, we are treating patients who are JAK inhibitor-naïve, a first-line (“1L”) setting, as well as patients who are refractory to or intolerant of, or have had a sub-optimal response to, ruxolitinib, a second-line (“2L”) setting. Patient enrollment in the 1L setting has completed at approximately 80 patients.

We have also added a cohort (Arm 4) in MANIFEST to evaluate pelabresib as a monotherapy in patients with essential thrombocythemia (“ET”) as a potential opportunity to expand the potential indications for pelabresib. We plan to enroll approximately 20 high-risk, hydroxyurea-resistant or-intolerant patients with ET in this arm. ET is a myeloproliferative disorder that can progress to MF and that is characterized by excessive production of blood platelets, fatigue, lightheadedness, headaches, vision changes, and an increased risk of blood clots. The primary endpoint of this arm of the trial will be Complete Hematological Response within 24 weeks as measured by normalization of platelet count and white blood cell count, with a key secondary endpoint of TSS50 at 24 weeks.

As previously disclosed, in December 2020, we presented preliminary clinical and translational data for pelabresib as a monotherapy and in combination with ruxolitinib at the Annual Meeting of the American Society of Hematology, based on a September 29, 2020 data cutoff, that reflected an analysis of 63 1L patients and 94 2L or later patients. We believe that these preliminary data from MANIFEST suggest that pelabresib has the potential to offer meaningful benefits beyond the current standard of care in MF and may have disease-modifying effects.

EZH2 Inhibitor

CPI-0209

CPI-0209 is a small molecule designed to promote anti-tumor activity by specifically inhibiting EZH2, an enzyme that suppresses target gene expression. We designed CPI-0209, which is a second-generation EZH2 inhibitor, to achieve comprehensive coverage of

EZH2 to potentially enable deeper, more rapid, and more durable tumor regression, as well as to demonstrate improved metabolic properties compared with first-generation EZH2 inhibitors. We believe that CPI-0209 has the potential to be a best-in-class EZH2 inhibitor for use in a broad range of cancer types and to expand the addressable patient populations beyond those that have been targeted by first-generation EZH2 inhibitors.

We are currently conducting a Phase 1/2 clinical trial of CPI-0209 in patients with solid tumors and hematological malignancies. We recently determined the recommended Phase 2 dose for CPI-0209 as monotherapy to be a once daily oral dose of 350 mg based on data from the Phase 1 dose-escalation portion of the trial. For the Phase 2 proof of concept portion of the trial, we plan on evaluating the anti-tumor activity of CPI-0209 as a monotherapy in cohorts of patients with known ARID1A mutation with the following tumor types: relapsed urothelial carcinoma, relapsed ovarian clear cell carcinoma, relapsed endometrial carcinoma, as well as in patients with relapsed or refractory lymphomas of either B-cell or T-cell histology. We have opened enrollment for these four cohorts and the first patient has been dosed, and we plan to enroll up to 29 patients per cohort. As part of our future development plans, we plan to add two additional cohorts to the Phase 2 portion of the trial that would include patients with malignant mesothelioma with known BAP1 loss who have progressed on one prior line of therapy, and patients with metastatic castration-resistant prostate cancer who have progressed on at least one androgen receptor signaling inhibitor (ARSi) and at least 1 taxane-based therapy. The goal of these cohorts is to confirm safety and establish the antitumor activity of CPI-0209 as a monotherapy for the tumor types enrolled. The primary endpoint of the trial is objective response rate.

CPI-1205

CPI-1205 is our first-generation EZH2 inhibitor. In June 2020, we announced that we plan to discontinue development of CPI-1205 after completion of ProSTAR and to prioritize further clinical development of CPI-0209. ProSTAR is a Phase 1b/2 clinical study evaluating CPI-1205 combined with enzalutamide or abiraterone in patients with metastatic castration-resistant prostate cancer (mCRPC). The decision was based on a recent review of ProSTAR data, which did not demonstrate the definitive signal of activity necessary to advance the program into pivotal studies in mCRPC. We intend to present a full data set from ProSTAR in the future.

LSD1 Inhibitor – CPI-482

CPI-482 is an inhibitor of Lysine Specific Demethylase 1 (LSD1), a critical regulator of gene expression, required for hematopoietic stem cell maintenance and proper differentiation of megakaryocyte and erythroid lineages. In myelofibrosis, aberrant megakaryocyte biology is responsible for elevated inflammatory cytokine production and bone marrow dysfunction. Inhibition of LSD1 by CPI-482 suppressed megakaryocyte formation in ex vivo differentiation experiments and reduced spleen volume and bone marrow fibrosis and improved survival in myelofibrosis and leukemia mouse models. We are exploring the potential of CPI-482 as a potential clinical candidate and therapeutic option in hematologic malignancies, including in myeloproliferative neoplasms (“MPNs”) and plan to complete IND enabling studies by the end of 2021.

COVID-19 Pandemic

The ongoing COVID-19 pandemic has affected and will continue to affect our business and operations. The section below provides an update of the impact of the COVID-19 pandemic on our business and operations.

Clinical trial execution. Throughout the COVID-19 pandemic, patient safety has remained paramount in the execution of our clinical trials. MANIFEST, MANIFEST-2, and CPI-0209 clinical trials have remained open to enrollment throughout the COVID-19 pandemic. However, the pandemic has impacted and may continue to impact various aspects of our clinical trials. For example, we have experienced enrollment delays for MANIFEST and delays in clinical trial site initiation for MANIFEST-2 due to disruptions and limited resources and staffing at some of our clinical sites in certain regions. Additionally, we have experienced some incidences of incomplete data collection and disruptions in monitoring visits in the MANIFEST and CPI-0209 clinical trials. We are continuing to work with our clinical sites and third-party contractors to monitor and assess the impact of the pandemic on our clinical trials.

Manufacturing and Supply. While we are not currently experiencing supply chain disruptions in manufacturing for any of our product candidates, we have, in the past, experienced some disruption in our supply chain from our suppliers due to the COVID-19 pandemic. We experienced a brief delay in the third quarter of 2020 in the manufacturing of pelabresib tablets at a manufacturer in the United States due to COVID-19 safety policies at the manufacturing site. Our laboratory kit supplier is experiencing, and may continue to experience, supply chain issues due to the increased demand for kits associated with the pandemic.

Offices. We continue to implement policies at our office and laboratory space to mitigate the risk of exposure to COVID-19 by our personnel, including operating our laboratory facilities at reduced capacity with mandated safety protocols in place, maintaining a work-from-home policy for the majority of our non-laboratory personnel, and providing on-site testing for all lab personnel and employees who have access to our facility.

Financial Overview

As of March 31, 2021, we have funded our operations with the sales of convertible preferred stock, payments received in connection with collaboration agreements, borrowings under loan agreements, and proceeds from our public and private offerings of our common stock. Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. For the three months ended March 31, 2021, we reported a net loss of $40.1 million. As of March 31, 2021, we had an accumulated deficit of $485.8 million. We expect to continue to incur significant expenses and increasing operating losses for at least in the foreseeable future. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

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conduct our MANIFEST-2 trial and continue our MANIFEST trial, conduct our Phase 1/2 clinical trial of CPI-0209, and conduct IND-enabling studies of CPI-482;

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advance our clinical-stage product candidates from mid-stage into later-stage trials;

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continue the research and development of our other product candidates;

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seek to discover and develop additional product candidates;

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seek regulatory approvals for any product candidates that successfully complete clinical trials;

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

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scale up our manufacturing processes and capabilities, or arrange for a third party to do so on our behalf, to support our clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

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acquire or in-license products, product candidates or technologies;

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maintain, expand, enforce, defend and protect our intellectual property portfolio;

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hire additional clinical, quality control and scientific personnel; and

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add operational, financial and administrative personnel, including personnel to support our product development and planned future commercialization efforts and our operations as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings; debt financings; collaborations; strategic alliances; and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and may be forced to reduce or terminate our operations.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of $382.1 million. We expect that our existing cash, cash equivalents and marketable securities will enable us to fund our planned operating expenses and capital expenditure requirements into mid-2023. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. See “– Liquidity and Capital Resources.”

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We have entered into, and we may in the future enter into, license or collaboration agreements for our product candidates or intellectual property, and we may generate revenue in the future from payments as a result of such license or collaboration agreements. To date, all of our revenue has been derived from one collaboration arrangement. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

Operating Expenses

Research and Development Expenses

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

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employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

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expenses incurred in connection with the preclinical and clinical development of our product candidates and research programs, including under agreements with third parties, such as consultants and contractors and contract research organizations, or CROs;

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the cost of developing and scaling our manufacturing process and manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants and contractors and contract manufacturing organizations, or CMOs;

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laboratory supplies and research materials;

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facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance; and

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payments made under third-party licensing agreements.

In July 2012, we entered into a Research, Development and Commercialization Agreement, or the LLS Agreement, with the Leukemia & Lymphoma Society, or LLS, pursuant to which LLS committed to provide funding to us for research and development services, conditional on (i) the achievement of milestones in accordance with the LLS Agreement and (ii) equal funding being provided by us. We recognize the nonrefundable payments received under the LLS Agreement as a reduction to the research and development expenses incurred, based on a proportional methodology comparing the total expenses incurred in the period under the project to the total expenses expected to be incurred under the project. Through December 31, 2020, we had received funding totaling $7.3 million from LLS upon the achievement of specified milestones, which were recorded as a reduction of our research and development expenses. There was no additional funding received in the three months ended March 31, 2021.

We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Our direct external research and development expenses are tracked on a program-by-program basis and consist of costs that include fees, reimbursed materials and other costs paid to consultants, contractors, CMOs and CROs in connection with our preclinical, clinical development and manufacturing activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies and facilities expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned clinical and preclinical development activities in the near term and in the future as our current development programs progress and new programs are added. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

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our ability to raise additional funds necessary to complete clinical development of and commercialize our product candidates;

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the progress of the development efforts of parties with whom we may enter into collaboration arrangements;

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our ability to maintain our current research and development programs and to establish new ones;

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our ability to establish new licensing or collaboration arrangements;

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the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority;

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the receipt and related terms of regulatory approvals from applicable regulatory authorities;

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the availability of raw materials for use in production of our product candidates;

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our ability to consistently manufacture our product candidates for use in clinical trials;

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our ability to establish and operate a manufacturing facility, or secure manufacturing supply through relationships with third parties;

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our ability to obtain and maintain intellectual property protection and regulatory exclusivity, both in the United States and internationally;

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our ability to maintain, enforce, defend and protect our rights in our intellectual property portfolio;

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the commercialization of our product candidates, if and when approved;

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our ability to obtain and maintain third-party coverage and adequate reimbursement;

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the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;

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competition with other products; and

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a continued acceptable safety profile of our therapies following approval.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with our growing operations and any future commercialization and marketing activities.

Other Income (Expense)

Interest Income

Interest income consists of interest earned on our invested cash balances and associated with our marketable securities.

Interest Expense

Expense consists of interest expense on borrowings under the Hercules Loan Agreement, as well as amortization of debt discount and debt issuance costs, which was paid off in November 2020.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
	2021			2020			Change
	(in thousands)
Operating expenses:
Research and development	$	30,784		$	20,075		$	10,709
General and administrative		9,442			5,908			3,534
Total operating expenses		40,226			25,983			14,243
Loss from operations		(40,226	)		(25,983	)		(14,243	)
Other income (expense):
Interest income		154			1,404			(1,250	)
Interest expense		—			(850	)		850
Total other income (expense), net		154			554			(400	)
Loss before income taxes		(40,072	)		(25,429	)		(14,643	)
Income tax expense		—			15			(15	)
Net loss	$	(40,072	)	$	(25,444	)	$	(14,628	)

Research and Development Expenses

	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Direct research and development expenses by program:
pelabresib	$	12,107	$	7,231	$	4,876
CPI-0209		2,996		1,335		1,661
CPI-1205		904		2,230		(1,326	)
Preclinical pipeline		2,220		911		1,309
Unallocated expenses:
Personnel related (including stock-based compensation)		10,040		6,158		3,882
Laboratory supplies and consumables		737		710		27
Facility related and other		1,780		1,500		280
Total research and development expenses	$	30,784	$	20,075	$	10,709

Research and development expenses were $30.8 million for the three months ended March 31, 2021 compared to $20.1 million for the three months ended March 31, 2020.The increase in costs related to our pelabresib program was primarily due to the startup expenses for our MANIFEST-2 trial in the first quarter of 2021. The increase in costs related to our CPI-0209 program was primarily due to increases in process chemistry expenses and increases in clinical expenses as we expanded into the Phase 2 portion of the trial. The increase in costs of our preclinical pipeline was primarily due to increased external expenses due to the stage of preclinical assets, including our LSD1 inhibitor. The decrease in costs related to our CPI-1205 program was primarily due to lower expenses in our ProSTAR trial due to the closure of the trial.

The increase in personnel related costs was primarily due to overall increase in headcount in the first quarter of 2021. Personnel related costs for the three months ended March 31, 2021 and 2020 included stock-based compensation expense of $2.3 million and $1.0 million, respectively.

General and Administrative Expenses

	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Personnel related (including stock-based compensation)	$	6,220	$	3,449	$	2,771
Professional and consultant fees		1,638		1,066		572
Facility related and other		1,584		1,393		191
Total general and administrative expenses	$	9,442	$	5,908	$	3,534

General and administrative expenses for the three months ended March 31, 2021 were $9.4 million, compared to $5.9 million for the three months ended March 31, 2020. The increase was primarily due to an increase in personnel related costs, which was primarily due to increased headcount and increased stock-based compensation expense in 2021. Personnel related costs for the three months ended March 31, 2021 and 2020 included stock-based compensation expense of $3.2 million and $1.6 million, respectively. Professional and consultant fees also increased due to supporting our growing operations, future commercialization and marketing activities.

Other Income (Expense)

Interest Income

Interest income was $0.2 million for the three months ended March 31, 2021 and $1.4 million for the three months ended March 31, 2020.

Interest Expense

Interest expense were $0.0 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively, consisted primarily of cash and non-cash interest related to the Hercules Loan Agreement, which we paid off in November 2020.

Income Tax Expense

Income tax expense were $0.0 million and less than $0.1 million for the three months ended March 31, 2021 and 2020, respectively, consisted of income tax accrued for the interest income associated with our marketable securities.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. As of March 31, 2021, we have financed our operations primarily through sales of our preferred stock, payments received in connection with our collaboration and research agreements, borrowings under loan agreements, and proceeds from sales of public and private offerings of our common stock. As of March 31, 2021, we had cash, cash equivalents and marketable securities of $382.1 million.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

	Three Months Ended March 31,
	2021			2020
	(in thousands)
Cash used in operating activities	$	(39,738	)	$	(26,030	)
Cash used in investing activities		(11,207	)		(118,749	)
Cash provided by financing activities		1,235			911
Net decrease in cash, cash equivalents and restricted cash	$	(49,710	)	$	(143,868	)

Operating Activities

During the three months ended March 31, 2021, net cash used in operating activities was $39.7 million, primarily resulting from our net loss of $40.1 million, and changes in our operating assets and liabilities of $5.6 million, partially offset by net non-cash expenses of $6.0 million. Changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of $5.4 million decrease in accounts payable, $0.7 million increase in prepaid expenses and other current assets, and $0.2 million increase in net changes of operating lease, right-of-use assets and operating lease liabilities and other assets, offset by $0.6 million increase in accrued expenses and other current liabilities.

During the three months ended March 31, 2020, net cash used in operating activities was $26.0 million, primarily resulting from our net loss of $25.4 million, and changes in our operating assets and liabilities of $3.3 million, partially offset by net non-cash expense of $2.7 million. Changes in our operating assets and liabilities for the three months ended March 31, 2020 consisted primarily of a $3.7 million decrease in accounts payable, partially offset by $0.4 million increase in accrued expenses and other current liabilities, and prepaid expense and other current assets.

Investing Activities

During the three months ended March 31, 2021 and 2020, net cash used in investing activities was $11.2 million and $118.7 million, respectively, due to cash investment in marketable securities and new purchases of research and development equipment, partially offset by the proceeds from maturities and sales of marketable securities.

Financing Activities

During the three months ended March 31, 2021 and 2020 net cash provided by financing activities consisted primarily of net proceeds from exercise of stock options of $1.2 million and $0.9 million, respectively.

Loan and Security Agreement

On March 20, 2019, we entered into a loan agreement with Hercules (the “Loan Agreement”), under a term loan facility, pursuant to which we could borrow up to $40.0 million. We had borrowed $30.0 million under the Loan Agreement. The term loan bore interest at an annual rate equal to the greater of 8.55% and the prime rate of interest plus 2.55%. The Loan Agreement provided for interest-only payments until April 30, 2021, and repayment of the aggregate outstanding principal balance of the term loan in monthly installments starting on May 1, 2021 and continuing through April 1, 2023 (the “Maturity Date”). In addition, we paid a fee of $0.3 million upon closing and were required to pay a fee of 6.35% of the aggregate advances under the Loan Agreement at maturity.

On November 3, 2020, we repaid in full all principal, accrued and unpaid interest, fees, costs and expenses owed under the Loan Agreement, in an aggregate amount of approximately $32.2 million.

At-the-Market Offering

In August 2019, we entered into an Open Market Sale Agreement with Jefferies LLC, under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to $50.0 million through Jefferies as sales agent. Any such sales being made by any method that is deemed an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We will pay Jefferies LLC a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the Sales Agreement. During the three months ended March 31, 2021, we did not sell any shares under the Sales Agreement.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. In addition, we expect to incur additional costs associated with our growing operations, future commercialization and marketing activities. The timing and amount of our operating expenditures will depend largely on:

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the timing and progress of preclinical and clinical development activities;

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the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

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the timing and outcome of regulatory review of our product candidates;

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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

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our requirements and timing to expand headcount and facilities in order to support our growing operations:

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changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;

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developments concerning our contract manufacturers;

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our ability to obtain materials to produce adequate product supply for any approved product or inability to do so at acceptable prices;

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our ability to establish additional collaborations if needed;

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;

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the legal patent costs involved in preparing, filing and prosecuting patent applications and maintaining, defending and enforcing patent claims and other intellectual property claims;

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additions or departures of key scientific or management personnel;

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unanticipated serious safety concerns related to the use of our product candidates; and

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the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of $382.1 million. We expect that our existing cash, cash equivalents and marketable securities, will enable us to fund our planned operating expenses and capital expenditure requirements into mid-2023. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Until such time as we can generate substantial product revenue, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

In our 2020 Form 10-K Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Contractual Obligations and Commitments”, we have described our commitments and contingencies. There were no material changes to our total contractual commitments and obligations during the three months ended March 31, 2021.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that of our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”), the following involve the most judgment and complexity:

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vendors in connection with preclinical development activities;

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CMOs in connection with the process development and scale up activities and the production of preclinical and clinical trial materials; and

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CROs and other providers in connection with clinical trials.

Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in the Annual Report.

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 SEC.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of $382.1 million. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.

We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation would generally affect us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2021 and the year ended December 31, 2020.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2021 at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, certain of our employees began working remotely in March 2020. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We have been and will continue to monitor and assess the COVID-19 pandemic to determine any potential impacts on our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal matters or claims and did not have contingency reserves established for any litigation liabilities as of March 31, 2021 or December 31, 2020.

Item 1A. Risk Factors

Our business is subject to numerous risks. The following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in this Quarterly Report on Form 10-Q and other filings with the Securities and Exchange Commission, or the SEC, press releases, communications with investors, and oral statements. Actual future results may differ materially from those anticipated in our forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Risks related to our financial position and need for additional capital

We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net loss was $40.1 million for the three months ended March 31, 2021, $126.4 million for the year ended December 31, 2020. As of March 31, 2021, we had an accumulated deficit of $485.8 million. To date, we have financed our operations primarily though sales of convertible preferred stock, payments received in connection with collaboration agreements, borrowings under loan agreements and proceeds from our public and private offerings of our common stock. All of our revenue to date has been collaboration revenue. We have devoted substantially all of our financial resources and efforts to research and development, including clinical trials and preclinical studies. We are still in the early stages of development of our product candidates, and we have not completed development of any product candidates. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we continue to advance our goal of becoming a fully integrated pharmaceutical company, with a broad pipeline of hematology and oncology development and discovery programs, as well as potential commercial products, including as we:

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advance our MANIFEST-2 trial, and other aspects of pivotal development of pelabresib (CPI-0610), continue our MANIFEST trial and our Phase 1/2 clinical trial of CPI-0209, our second-generation EZH2 inhibitor, and complete IND-enabling studies of CPI-482, our LSD1 inhibitor;

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advance certain of our clinical-stage product candidates into later stage trials;

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continue the research and development of our other product candidates;

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seek to discover and develop additional product candidates;

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seek regulatory approvals for any product candidates, including pelabresib, that successfully complete clinical trials;

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

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acquire or in-license products, product candidates or technologies;

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maintain, expand, enforce, defend and protect our intellectual property portfolio;

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hire additional personnel to support our product development and planned future commercialization efforts and our operations as a public company; and

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add operational, financial and administrative personnel, including personnel to support our product development and planned future commercialization efforts and our operations as a public company.

To become and remain profitable, we must succeed in developing, and eventually commercializing, a product or products that generate significant revenue. The ability to achieve this success will require us to be effective in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase if, among other things:

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we are required by the FDA, the European Medicines Agency, or the EMA, or other regulatory authorities to perform trials or studies in addition to those currently expected;

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there are any delays in completing our clinical trials or the development of any of our product candidates, including due to the COVID-19 pandemic; or

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there are any third-party challenges to our intellectual property, or we need to defend against any intellectual property-related claim.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause our stockholders to lose all or part of their investment.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue our Phase 2 clinical trial of pelabresib, MANIFEST, our Phase 3 clinical trial of pelabresib, MANIFEST-2, our Phase 1/2 clinical trial of CPI-0209, complete our Phase 1b/2 clinical trial of CPI-1205, and proceed with our IND-enabling studies for CPI-482. We plan to continue research and development and initiate additional clinical trials of, and seek regulatory approval for, these and other product candidates, and we also plan to build out our organization for the potential commercialization of pelabresib. We expect our expenses to increase substantially in connection with our ongoing activities. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we will incur additional costs associated with operating as a more mature public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce, or eliminate our research and development programs or any future commercialization efforts.

Our future capital requirements will depend on many factors, including:

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the progress, costs, and results of our on-going clinical trials;

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the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for any other product candidates we may develop in the future;

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the number and development requirements of other product candidates that we pursue;

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

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our ability to establish and maintain strategic collaborations, licensing, or other arrangements and the financial terms of such arrangements;

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milestones and other collaboration-based revenues, if any;

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the costs and timing of future commercialization activities, including infrastructure build out, product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval;

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the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

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

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the impact of the COVID-19 pandemic on our business and operations; and

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the extent to which we acquire or in-license other products, product candidates, or technologies.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of approximately $382.1 million. We expect that our existing cash, cash equivalents and marketable securities, will enable us to fund our planned operating expenses and capital expenditure requirements into mid-2023. However, we have based these estimates on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. As a result, we could deplete our capital resources sooner than we currently expect.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Commercial revenues, if any, will not be derived unless and until we can achieve sales of commercially available products, which we do not anticipate for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce, or terminate preclinical studies, clinical trials or other development activities for one or more of our product candidates, or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.

Raising additional capital may cause dilution to our stockholders, restrict our operations, or require us to relinquish rights to our technologies or product candidates.

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

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

Our limited operating history may make it difficult for our stockholders to evaluate the success of our business to date and to assess our future viability.

We commenced active operations in early 2008, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and conducting clinical trials. We have not yet demonstrated our ability to successfully develop any product candidate, obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions our stockholders make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as our business grows, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, our stockholders should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.

Recent changes in tax law may adversely affect our business or financial condition. On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act, or the TCJA, which significantly revised the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years

beginning after December 31, 2017 to 80% of annual taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the imposition of a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, the elimination of U.S. tax on foreign earnings (subject to certain important exceptions), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.

As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020. COVID-19 relief provisions were also included in the Consolidated Appropriations Act, 2021, or CAA, which was enacted on December 27, 2020. The FFCR Act, the CARES Act, and the CAA contain numerous tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of net operating losses, which was enacted as part of the TCJA. It also provides that net operating losses arising in any taxable year beginning after December 31, 2017, and before January 1, 2021, are generally eligible to be carried back up to five years. The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation on the tax deductibility of net interest expense by increasing the limitation from 30 to 50% of adjusted taxable income.

Regulatory guidance under the TCJA, the FFCR Act, the CARES Act, and the CAA is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition. It is also likely that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company. In addition, it is uncertain if and to what extent various states will conform to the TCJA, the FFCR Act, the CARES Act, or the CAA.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

As of December 31, 2020, we had federal net operating loss carryforwards of $440.5 million and federal research and development tax credit carryforwards of $19.5 million, some of which will, if not utilized, begin to expire in 2028. To the extent that they expire unused, these net operating loss and tax credit carryforwards will not be available to offset our future income tax liabilities. Federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely.

In general, under Sections 382 and 383 of the Code and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change net operating loss and credit carryforwards to reduce its tax liability for post-change periods may be limited.

As of December 31, 2020, we performed an analysis and determined that we experienced ownership changes under Section 382 of the Code prior thereto. We currently expect that approximately $14.3 million and approximately $7.2 million of the Company’s currently unexpired net operating loss and tax credit carryforwards, respectively, may be unavailable for utilization within their applicable carryforward periods based on the annual limitation under Section 382.

We also may experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control. In addition, we have not conducted a detailed study to document whether our historical activities qualify to support the research and development credits currently claimed as a carryforward. A detailed study could result in adjustment to our research and development credit carryforwards. If we determine in the future that an ownership change has occurred and our ability to use our historical net operating loss and tax credit carryforwards is further limited, or if our research and development carryforwards are adjusted, our ability to use those attributes to offset future income tax liabilities would be limited.

There is also a risk that due to regulatory changes, such as suspensions on the use of net operating losses, or other unforeseen reasons, our existing net operating losses could expire or otherwise become unavailable to offset future income tax liabilities. As described above in “Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition,” the TCJA, as amended by the CARES Act, includes changes to U.S. federal tax rates and the rules governing net operating loss carryforwards that may significantly impact our ability to utilize our net operating losses to offset taxable income in the future. In addition, state net operating losses generated in one state cannot be used to offset income generated in another state. For these reasons, even if we attain profitability, we may be unable to use a material portion of our net operating losses and other tax attributes.

Risks Related to the Discovery and Development of our Product Candidates

The ongoing COVID-19 pandemic has affected and may continue to affect our ability to conduct our ongoing clinical trials, including delays in site initiation and patient enrollment, as well as incomplete data collection at some sites. It may also disrupt regulatory activities or have other adverse effects on our business and operations. In addition, this pandemic has adversely impacted economies worldwide, which could result in adverse effects on our business, operations and ability to raise capital.

The COVID-19 pandemic and government measures taken in response to it have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The COVID-19 pandemic has disrupted the normal operations of business across industries, including ours, and the future progression of the pandemic and its effects on our business and operations remain uncertain.

We and our third-party contract manufacturers, contract research organizations, and clinical sites have experienced, and may continue to experience, disruptions in supply of product candidates and/or procuring items that are essential for our research and development activities, including raw materials used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak. For instance, in the third quarter of 2020, we experienced delays in our product manufacturing supply chain. While these delays have not materially impacted our overall manufacturing supply chain operations to date, we continue to work toward establishing backup sources of supply and manufacturing for all of our product candidates to avoid any future disruption in the supply chain from the COVID-19 pandemic, and any potential future outbreak or further disruptions or delays in receiving supplies of our product candidates or the supplies used in the conduct of our clinical trials could have a material adverse impact on our clinical trial plans and business operations.

Additionally, most of our clinical trial sites are in areas affected by COVID-19 and, as a result, our trials are being impacted and may continue to be impacted. For example, we have experienced delays in enrollment for MANIFEST and delays in clinical trial site initiation for MANIFEST-2 due to disruptions and limited resources and staffing at some of our clinical sites in certain regions. Additionally, we have experienced some incidences of incomplete data collection due to missed study visits, as well as disruptions in monitoring visits in the MANIFEST and CPI-0209 clinical trials due to safety protocols at clinical trial sites that restrict on-site monitoring and limitations on remote monitoring at certain sites. We cannot predict how long or impactful these delays may be on our clinical trials. We are facing, and may continue to face, slow-downs due to periods of government lockdown in certain locations, hospital staff re-deployment to COVID-19 patients and/or prioritization of COVID-19-related clinical trials, staffing shortages at our clinical trial sites and third-party contractors, and disruptions in sourcing the laboratory kits used to collect biologic samples in our clinical trials due to the increased demand for kits associated with the pandemic. An inability to obtain such laboratory kits could result in delays in initiating certain sites and patient enrollment, as investigators may be hesitant to initiate patients in our clinical trials without the trial-specific sample collection kits, as well as an increased risk of potential data loss from enrolled patients.

Prolonged delays or closure to enrollment in our trials or patient discontinuations could have a material adverse impact on our clinical trial plans and timelines. In addition, our ability to collect and verify data requested of patients enrolled in our clinical trials during this pandemic is being impacted to varying degrees by COVID-19. Clinical trial data collection continues for each of our clinical trials but at a slower pace, and with challenges and interruptions in data collection, including, in some instances, disruption of collection of complete study data. This could have a material adverse impact on our data quality and analysis. In addition, clinical trial sites may be unable or unwilling to initiate a new trial if factors relevant to the pandemic render this impracticable. These COVID-19 related issues may prolong the time required to conduct our ongoing clinical trials, and/or impact the quality of the data obtained from one or more of these studies.

The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.

Additionally, the impact of the COVID-19 pandemic in Massachusetts has resulted in capacity limitations at our facilities and laboratory. Any prolonged capacity limitations or future facility closures may substantially impact our research and other business activities as well as the morale of our employees. Furthermore, any negative impact that the outbreak has on the ability of our contract research organizations to deliver data sets and execute on experimentation could cause substantial delays for our discovery activities and materially impact our ability to fuel our pipeline with new product candidates.

Any negative impact that the COVID-19 pandemic has on recruiting or retaining patients in our clinical trials, obtaining complete clinical trial data or on the ability of our suppliers to provide materials for our product candidates could cause additional delays to clinical trial and developmental activities, which could materially and adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, affect our ability to raise additional capital, and have a material adverse effect on our financial results.

The COVID-19 pandemic has also significantly impacted economies worldwide, which could result in adverse effects on our business, operations and ability to raise capital. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business. It has the potential to adversely affect our business, financial condition, results of operations, and prospects.

Our approach to the discovery and development of product candidates based on the inhibition of epigenetic regulators by small molecules is an emerging field, and we do not know whether we will be able to successfully develop any products.

The discovery and development of small molecules that inhibit epigenetic regulators to restore normal gene expression is an emerging field, and the scientific discoveries that form the basis for our efforts to discover and develop product candidates are relatively new. Although epigenetic regulation of gene expression plays an essential role in biological function, few drugs premised on the inhibition of epigenetic regulators have been developed.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must conduct extensive clinical trials to demonstrate the safety and efficacy of such product candidate in humans. We have not yet completed a pivotal clinical trial of any product candidate. Clinical trials may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. Even if the clinical trials are successful, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may cause delays in the approval or rejection of an application. As a result of these factors, it is more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of our epigenetic platform, or any similar or competitive epigenetic platforms, will result in the development and regulatory approval of any products. There can be no assurance that any development problems we experience in the future related to our epigenetics platform or any of our research programs will not cause significant delays or unanticipated costs, or that such development problems can be solved.

In addition, adverse developments in preclinical studies or clinical trials conducted by others of epigenetic product candidates or adverse events in patients treated with epigenetic products may cause the FDA or other regulatory agencies to require modifications to clinical trials of epigenetic product candidates, revise the requirements for approval of epigenetic product candidates or limit the use of epigenetic products, any of which could materially harm our business. Moreover, there have been significant adverse side effects in clinical trials of epigenetic product candidates of our competitors. For example, with respect to our EZH2 programs, one competitor reported that some patients in its Phase 1 clinical trial of an EZH2 inhibitor had developed secondary hematological malignancies following treatment. This same company previously reported that in the course of the preclinical safety studies of its EZH2 inhibitor, it had observed the development of lymphoma in juvenile rats at higher doses than the labeled dose for adult humans. We have no clinical data from our studies to date to suggest that patients are likely to experience similar side effects with our product candidates that inhibit EZH2. However, due to concerns regarding hematological malignancies, the FDA previously inquired about our plans for typical long-term toxicology studies of CPI-1205, and required that we include the development of a rare leukemia as a potential risk in the informed consent for our CPI-1205 and CPI-0209 trials. The FDA required us to update the investigator’s brochure and informed consent for our trials of CPI-1205 and the investigator’s brochure and the study protocol for CPI-0209 to include the risk of the development of T-cell lymphoma.

As per FDA guidance, we conducted a long-term toxicology study in rats that were administered CPI-1205. The final reports from the 90-day repeat-dose toxicology study indicated once daily oral administration of CPI-1205 in the main study group rats resulted in malignant T-cell lymphoma in four out of ten female rats in the high dose (300 mg/kg/day) group. This finding was not observed in male rats. Although lymphoma can occur spontaneously in young rats, these findings were considered related to administration of CPI-1205 due to the high incidence in the females at 300 mg/kg/day relative to controls. As of January 13, 2021, a total of 211 patients had been treated with CPI-1205 in clinical trials. Based on a review of all treatment-emergent adverse events reported by 211 patients as of January 13, 2021, there were no findings of secondary hematological malignancies. We notified the FDA of these preclinical toxicology findings and updated our investigator brochure and informed consent form for CPI-1205 to include information about the findings of the toxicology study.

With respect to our BET inhibitor program, non-clinical studies have confirmed that pelabresib has the potential to be genotoxic, or damaging to DNA. We do not currently believe that the finding will have an impact on our clinical development plans for pelabresib in MF; however, we cannot guarantee that such finding will not do so in this indication or in any others. As previously disclosed, following our initial discussions with the FDA, we have updated our investigator brochure and informed consent form for pelabresib to include information about the findings of the genotoxicity studies.

Adverse events in our or our competitors’ preclinical studies and/or clinical trials of epigenetic product candidates, even if not ultimately attributable to the product candidate under exploration, and the resulting negative publicity, could result in increased governmental regulation, unfavorable public perception, inadequate acceptance in the medical community, potential regulatory delays in the testing or approval of our product candidates and any additional product candidates that we may identify and develop, stricter labeling requirements for those product candidates that are approved, and a decrease in demand for any such product candidates.

Any of these factors may prevent us from completing our preclinical studies, completing any clinical trials that we may initiate or commercializing any product candidates we may develop, on a timely or profitable basis, if at all.

We are early in our development efforts. If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

All of our product candidates are still in development. We are currently developing pelabresib for the treatment of MF in Phase 2 and Phase 3 clinical trials and exploring it for the treatment of ET in Arm 4 of our Phase 2 clinical trial, and we are conducting a Phase 1/2 clinical trial for our second generation EZH2 inhibitor CPI-0209. Additional product candidates are still in preclinical development, with CPI-482 in IND-enabling studies. We previously announced that we will not be advancing CPI-1205 beyond the ongoing clinical trial. We have invested substantially efforts and financial resources in our integrated epigenetics platform to discover and develop new drugs that selectively modulate gene expression that may lead to the killing or reprogramming of cancer cells or result in anti-tumor immune activity. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates. The success of our product candidates will depend on several factors, including the following:

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successfully completing preclinical studies and clinical trials;

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expanding and maintaining a workforce of experienced scientists and others with relevant experience to continue to develop our product candidates;

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successfully applying for and receiving marketing approvals from applicable regulatory authorities;

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obtaining and maintaining intellectual property protection and regulatory exclusivity for our product candidates;

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making arrangements with third-party manufacturers for, or establishing, commercial manufacturing capabilities;

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establishing sales, marketing and distribution capabilities and successfully launching commercial sales of the products, if and when approved, whether alone or in collaboration with others;

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acceptance of the products, if and when approved, by patients, the medical community and third-party payors;

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effectively competing with other therapies;

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obtaining and maintaining coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;

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maintaining, enforcing, defending and protecting our rights in our intellectual property portfolio;

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not infringing, misappropriating or otherwise violating others’ intellectual property or proprietary rights; and

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maintaining a continued acceptable safety profile of the products following approval.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop and commercialize our product candidates, which would materially harm our business.

We may not be successful in our efforts to use our product platform to build a pipeline of product candidates.

One element of our strategy to date has been to use our integrated epigenetics product platform to build a pipeline of small molecule product candidates that selectively modulate gene expression in tumor and immune cells to drive anti-tumor activity and progress these product candidates through clinical development for the treatment of a variety of different types of cancer.

We may not be able to identify additional compelling potential product candidates. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our technological approach, we will not be able to obtain product revenues in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

We have product candidates in clinical development and preclinical development. The risk of failure for each of our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Product candidates are subject to continued preclinical safety studies, which may be conducted concurrent with our clinical testing. The outcomes of these safety studies may delay the launch of or enrollment in future clinical trials.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Furthermore, the failure of any of our product candidates to demonstrate safety and efficacy in any clinical trial could negatively impact the perception of our other product candidates and/or cause the FDA or other regulatory authorities to require additional testing before approving any of our product candidates. In addition, results from compassionate use protocols or investigator-sponsored trials may not be confirmed in company-sponsored trials and/or may negatively impact the prospects for our programs.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

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regulators or institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

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we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

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we may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;

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preclinical testing may produce results based on which we may decide, or regulators may require us, to conduct additional preclinical studies before we proceed with certain clinical trials, limit the scope of our clinical trials, halt ongoing clinical trials or abandon product development programs;

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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;

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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

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we may amend our protocols or suspend or terminate clinical trials of our product candidates for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

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regulators or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

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clinical or regulatory developments with competitive product candidates could impact our clinical trial enrollment and/or requirements, costs and timelines for potential approval of our own product candidates;

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regulators or IRBs may require us to perform additional or unanticipated clinical trials to obtain approval or we may be subject to additional post-marketing testing requirements to maintain regulatory approval;

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regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate;

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the cost of clinical trials of our product candidates may be greater than we anticipate;

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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be delayed, insufficient or inadequate;

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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials; and

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regulators may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a risk evaluation and mitigation strategy, or REMS.

We may use new or novel endpoints or methodologies and the FDA or other regulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results. Even if applicable regulatory authorities do not object to our proposed endpoints in an earlier stage clinical trial, such regulatory authorities may require evaluation of additional or different clinical endpoints in later-stage clinical trials. Even if the FDA does find our clinical trial success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoint to a degree of statistical significance in any pivotal or other clinical trials we may conduct for our product candidates. Further, even if we do achieve the pre-specified criteria, our trials may produce results that are unpredictable or inconsistent with the results of the more traditional efficacy endpoints in the trial. The FDA also could give overriding weight to other efficacy endpoints over a primary endpoint, even if we achieve statistically significant results on that primary endpoint, if we do not do so on our secondary efficacy endpoints. The FDA also weighs the benefits of a product against its risks and the FDA may view the efficacy results in the context of safety as not being supportive of approval. Other regulatory authorities in Europe and other countries may make similar findings with respect to these endpoints.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

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be delayed in obtaining marketing approval for our product candidates;

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not obtain marketing approval at all;

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obtain approval for indications or patient populations that are not as broad as intended or desired;

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obtain approval with labeling or a REMS that includes significant use or distribution restrictions or safety warnings;

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be subject to additional post-marketing testing requirements; or

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have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also determine to change the design or protocol of one or more of our clinical trials, including to add additional arms or patient populations, which could result in increased costs and expenses and/or delays. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside of the United States. In particular, because certain of our products may be focused on specific patient populations, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate. In addition, some of our competitors have ongoing clinical trials for product candidates that may treat the broader patient populations within which our product candidates are being developed for the treatment of a subset of identifiable patients with cancer and other diseases, and patients who would otherwise be eligible for our clinical trials (for example, JAK-naïve MF patients that would be eligible our Phase 3 trial MANIFEST-2) may instead enroll in clinical trials of our competitors’ product candidates.

Patient enrollment is affected by a variety of other factors, including:

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the prevalence and severity of the disease under investigation;

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the eligibility criteria for the trial in question;

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the perceived risks and benefits of the product candidate under trial;

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the existence of existing treatments for the indications for which we are conducting clinical trials;

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the efforts to facilitate timely enrollment in clinical trials;

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the patient referral practices of physicians;

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the ability to monitor patients adequately during and after treatment;

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the proximity and availability of clinical trial sites for prospective patients;

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the conducting of clinical trials by competitors for product candidates that treat the same indications as our product candidates;

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the ability to identify specific patient population for biomarker-defined trial cohort(s); and

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the cost to, or lack of adequate compensation for, prospective patients.

Most of our clinical trial sites are in areas affected by COVID-19 and, as a result, our trials are being impacted. See the Risk Factor above entitled “The ongoing COVID-19 pandemic has affected and may continue to affect our ability to conduct our ongoing clinical trials, including delays in site initiation and patient enrollment, as well as incomplete data collection at some sites. It may also disrupt regulatory activities or have other adverse effects on our business and operations. In addition, this pandemic has adversely impacted economies worldwide, which could result in adverse effects on our business, operations and ability to raise capital.”Our inability to locate and enroll a sufficient number of patients for our clinical trials would result in significant delays, could require us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If our product candidates, either alone or in combination with other therapeutics, are associated with serious adverse events or undesirable side effects or unacceptable drug-drug interactions in clinical trials or have characteristics that are unexpected in clinical trials or preclinical testing, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In pharmaceutical development, many compounds that initially show promise in early-stage or clinical testing for treating cancer are later found to cause side effects that prevent further development of the compound. In addition, if third parties manufacture or use our product candidates without our permission, and generate adverse events or unacceptable side effects, this could also have an adverse impact on our development efforts.

We are currently pursuing the development of our product candidates in combination with other approved therapeutics. If the FDA revokes approval of any such therapeutic, or if safety, efficacy, manufacturing or supply issues arise with any therapeutic that we use in combination with one of our product candidates in the future, we may be unable to further develop and/or market our product candidate or we may experience significant regulatory delays or supply shortages, and our business could be materially harmed.

We are conducting MANIFEST-2, our pivotal Phase 3 clinical trial of pelabresib in combination with ruxolitinib, which is marketed by Incyte, Inc., and is currently approved to treat intermediate or high-risk MF, for the treatment of intermediate or high risk MF patients not previously treated with ruxolitinib. We are also conducting a Phase 2 clinical trial of pelabresib as a monotherapy or in combination with ruxolitinib in intermediate or high-risk MF patients who are ineligible for, intolerant to, or refractory to, ruxolitinib. We may commence additional clinical trials of our product candidates in combination with other approved therapeutics. We may also seek to develop our product candidates in combination with other therapeutics in the future.

We did not develop or obtain regulatory approval for, and we do not manufacture or sell, any of these approved therapeutics. In addition, these combinations have not been tested before and may, among other things, fail to demonstrate synergistic activity, may fail to achieve superior outcomes relative to the use of single agents or other combination therapies, may exacerbate adverse events associated with one of our product candidates when used as monotherapy or may fail to demonstrate sufficient safety or efficacy traits in clinical trials to enable us to complete those clinical trials or obtain marketing approval for the combination therapy.

If the FDA revokes its approval of any of these therapeutics, we will not be able to continue clinical development of or market pelabresib or any other product candidate in combination with such revoked therapeutic. If safety or efficacy issues arise with these or any other therapeutics that we seek to combine with our product candidates in the future, we may experience significant regulatory delays, and the FDA may require us to redesign or terminate the applicable clinical trials. Moreover, if these therapeutics were to receive regulatory approval in combination with a different therapeutic in any indication for which we are pursuing approval, such approval could impact the feasibility and design of any subsequent clinical trials that we may seek to conduct evaluating pelabresib or any other product candidate in combination with such therapeutic. If manufacturing, cost or other issues result in a supply shortage of this therapeutic or any other combination therapeutics, we may not be able to complete clinical development of pelabresib on our current timeline or at all, or any other product candidate we may develop in the future.

In addition, we may need, for supply, data referencing or other purposes, to collaborate or otherwise engage with the companies who market these approved therapeutics. If we are unable to do so on a timely basis, on acceptable terms or at all, we may have to curtail the development of a product candidate or indication, reduce or delay its development program, delay its potential commercialization or reduce the scope of any sales or marketing activities.

Even if pelabresib, or any other product candidate, were to receive regulatory approval and be commercialized for use in combination with ruxolitinib or another therapeutic, we would continue to be subject to the risk that the FDA could revoke its approval of such therapeutic, that safety, efficacy, manufacturing, cost or supply issues could arise with one of these therapeutic agents, or that the current standard of care may be replaced. This could result in pelabresib or any such other product candidate, if approved, being removed from the market or being less successful commercially.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. For example, in June 2020, we announced that we plan to discontinue development of CPI-1205 after completion of ProSTAR and to prioritize further clinical development of CPI-0209. The decision was based on a review of ProSTAR data, which we determined did not demonstrate the definitive signal of activity necessary to advance the program into pivotal studies in patients with mCRPC. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We currently conduct clinical trials for product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations.

We currently conduct clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and be performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt our development of the applicable product candidates.

Risks Related to the Commercialization of Our Product Candidates

If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

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the efficacy and potential advantages of our product candidates compared to alternative treatments;

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our ability to offer our products for sale at competitive prices;

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the clinical indications for which the product is approved;

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the convenience and ease of administration compared to alternative treatments;

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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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the strength of marketing and distribution support;

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the timing of market introduction of competitive products;

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the availability of third-party coverage and adequate reimbursement;

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the prevalence and severity of any side effects; and

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any restrictions on the use of our products together with other medications.

Our assessment of the potential market opportunity for our product candidates is based on industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions. If any of our assumptions or estimates, or these publications, research, surveys or studies prove to be inaccurate, then the actual market for any of our product candidates may be smaller than we expect, and as a result our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and are beginning to build our team with experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales, marketing and distribution organization, either ourselves or through collaborations or other arrangements with third parties.

In the future, we expect to build a focused, specialty sales and marketing infrastructure to market some of our product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

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the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;

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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

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unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to establish our own sales, marketing and distribution capabilities and enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of many of the disease indications for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Specifically, there are a large number of companies developing or marketing treatments for cancer and hematologic diseases, including many large pharmaceutical and biotechnology companies. In addition, many companies are developing cancer therapies that work by targeting epigenetic mechanisms, including through BET and EZH2 inhibition, such as AbbVie Inc., AstraZeneca PLC, BMS, Boehringer Ingelheim, CellCentric Ltd, Daiichi Sankyo Company, Eli Lilly & Company, Epizyme, Inc., GlaxoSmithKline plc, Incyte, Inc., Novartis AG, Pfizer Inc., Nuvation Bio, TG Therapeutics, and Zenith Epigenetics Ltd.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products before we do, or that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in additional challenges to our regulatory approval strategy and/or our competitors establishing a stronger market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. Generic products are currently on the market for many of the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our product candidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic products.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

If our contracted manufacturing facilities experience production issues for any reason, and/or we experience import/export issues for any reason, we may be unable to manufacture or supply clinical supplies or commercial quantities of our product candidates for a substantial amount of time, which could have a material adverse effect on our business.

We rely, and expect to continue to rely, on third parties to manufacture clinical supplies of our product candidates and commercial supplies of our products, if and when approved for marketing by applicable regulatory authorities, as well as for packaging, sterilization, storage, distribution and other production logistics. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or manufacture and release our product candidates in accordance with regulatory requirements, if there are disagreements between us and such parties, or if such parties are unable to expand capacities to support commercialization of any of our product candidates for which we obtain marketing approval, we may not be able to fulfill, or may be delayed in producing sufficient product candidates to meet, our supply requirements.

Similarly, we previously reported that we were closely monitoring our pelabresib supply due to potential production shortages with our manufacturers. In addition, the various manufacturing facilities with which we do business may also be affected by natural disasters, such as floods or fire, or societal disruptions or outbreaks such as the recently identified coronavirus. Further, facilities could face manufacturing issues, such as contamination or regulatory concerns following a regulatory inspection of such facility. In such instances, we may need to locate an appropriate replacement third-party facility and establish a contractual relationship, which may not be readily available or on acceptable terms, which would cause additional delay and increased expense, including as a result of additional required FDA approvals, and may have a material adverse effect on our business.

Our third-party manufacturers are subject to inspection and approval by the FDA before we can commence the manufacture and sale of any of our product candidates, and thereafter subject to FDA inspection from time to time. Failure by our third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidates may result in regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss of operating licenses.

We or our third-party manufacturers may also encounter shortages in the raw materials or active pharmaceutical ingredient necessary to produce our product candidates in the quantities needed for our clinical trials or, if our product candidates are approved, in sufficient quantities for commercialization or to meet an increase in demand, as a result of capacity constraints or delays or disruptions in the market for the raw materials or active pharmaceutical ingredient, including shortages caused by the purchase of such raw materials or active pharmaceutical ingredient by our competitors or others. The failure of us or our third-party manufacturers to obtain the raw materials or active pharmaceutical ingredient necessary to manufacture sufficient quantities of our product candidates, may have a material adverse effect on our business.

In addition, these third parties may be adversely affected by the COVID-19 pandemic. For instance, we previously disclosed a delay of supply of raw materials necessary to manufacture pelabresib from one of our contract manufacturers in China, a delay of supply of drug substance necessary to manufacture CPI-0209 from one of our contract manufacturers in India, and a delay in the manufacturing of pelabresib tablets at a manufacturer in the US due to COVID-19 safety policies at the manufacturing site. While these delays did not materially impact our overall manufacturing supply chain operations, any future disruption in the supply chain from the COVID-19 pandemic, or any potential future outbreak could have a material adverse impact on our clinical trial plans and business operations.

Some of our manufacturing activities take place outside of the United States. In addition, with respect to clinical trial or manufacturing activities that take place outside of the United States, changes in import/export regulations or practices could impact our ability to obtain critical materials, drug substance, or product candidates across international borders. Such challenges could have a material adverse effect on our business.

Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, which could harm our business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict

imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimburse

CONSTELLATION PHARMACEUTICALS INC 10-Q