Agios Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2013. Amounts are in U.S. dollars; financial statement figures are unaudited. Agios is an early-stage biopharmaceutical company focused on cancer metabolism and inborn errors of metabolism. It had no product sales; revenue was primarily from its Celgene collaboration.
Key financial metrics
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $6.3 million | $6.3 million | $18.8 million | $18.8 million |
| Research and development expense | $14.8 million | $9.8 million | $39.2 million | $29.8 million |
| General and administrative expense | $2.5 million | $1.6 million | $6.2 million | $5.5 million |
| Operating loss | $11.1 million | $5.1 million | $26.6 million | $16.5 million |
| Net loss | $11.2 million | $4.6 million | $27.0 million | $14.8 million |
| Net loss per share, basic and diluted | $0.47 | $0.83 | $2.26 | $2.81 |
Liquidity and capital: At September 30, 2013, cash and cash equivalents were $106.0 million and marketable securities totaled $102.4 million, or $208.4 million combined. Current assets were $198.8 million and current liabilities $37.4 million. The company reported no debt in the supplied balance sheet. Nine-month operating cash use was $42.8 million; investing cash use was $66.8 million, largely reflecting purchases of marketable securities; financing provided $124.3 million, primarily from the IPO and concurrent private placement. Management expected existing liquidity, anticipated interest income and Celgene expense reimbursements to fund operations and capital needs until at least Q4 2016.
Margins: Agios remained loss-making, with operating expenses substantially exceeding collaboration revenue; product-sales margins are not applicable because there were no product sales.
Material changes versus the prior comparable periods
- Q3 revenue was unchanged year over year, while nine-month revenue declined slightly by $20,000.
- R&D expense rose 51% in Q3 and 32% for the first nine months, reflecting greater external development and research activity, including clinical, preclinical and manufacturing work, and increased staffing.
- Net loss increased by $6.5 million in Q3 and $12.2 million for the first nine months. Higher R&D spending was the principal operating factor; the 2013 tax provision also contrasted with tax benefits recorded in 2012.
- The July 2013 IPO generated $111.0 million in net proceeds; a concurrent Celgene-affiliate placement added $12.8 million. Preferred stock converted into common stock at the IPO, materially increasing shares outstanding and affecting per-share comparisons.
- Cash, cash equivalents and marketable securities increased from $128.0 million at December 31, 2012 to $208.4 million at September 30, 2013.
Outlook, management commentary and risks
- Management expected expenses and operating losses to increase as clinical and preclinical programs advanced and public-company costs grew. The company did not provide a specific revenue or earnings forecast.
- AG-221 entered a Phase 1 study in August 2013, with first-patient dosing in September. AG-120 was expected to enter clinical development in early 2014; AG-348 was expected to enter clinical development in 2014.
- Celgene collaboration revenue was recognized ratably; no milestone or royalty payments had been received through September 30, 2013. The collaboration’s discovery phase was scheduled to expire in April 2014, with Celgene holding extension options.
- Agios warned that clinical success, regulatory approval, commercialization and future financing were uncertain. Additional funding may be needed; the company said it had no committed external funding source beyond the Celgene collaboration. Failure to raise capital could require delaying, reducing or ending programs.
- Other material risks include dependence on Celgene and third-party clinical and manufacturing providers, trial enrollment and safety uncertainty, competition, intellectual-property protection, and potential dilution. The company also disclosed foreign-currency exposure from certain CRO contracts, with no hedging in place.
- Management reported disclosure controls and procedures were effective at the reasonable-assurance level as of September 30, 2013. No material changes to contractual obligations or off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Progress, enrollment, safety and results in the AG-221 Phase 1 study, and the timing of clinical entry for AG-120 and AG-348.
- Actual cash burn and whether the projected funding runway through at least Q4 2016 remains achievable as development spending changes.
- Celgene’s extension and program-selection decisions, collaboration terms, and the timing and conditions for any potential milestones or reimbursements.
- Share-count changes, equity compensation and potential sales of locked-up shares; the filing noted that substantial shares could become eligible for public sale in January 2014.
- Tax liabilities and accrued interest and penalties related to unpaid U.S. federal income taxes; the filing reported $5.3 million of income taxes payable at September 30, 2013.