Agios Pharmaceuticals, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Financial statements are unaudited. Amounts below are in millions of dollars except per-share data.
Business context
Agios is a biopharmaceutical company developing medicines for hematologic malignancies, solid tumors and rare genetic diseases. Its commercial product is TIBSOVO (ivosidenib); it also receives collaboration revenue and, during the period, royalty revenue related to IDHIFA (enasidenib). The company reported continuing operating losses and expects significant research, development and commercialization spending.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $37.3 | $26.2 | $124.4 | $56.4 |
| Product revenue | $27.6 | $13.7 | $50.3 | $22.9 |
| Operating expenses | $127.5 | $140.1 | $257.8 | $267.8 |
| Loss from operations | $(90.2) | $(113.9) | $(133.4) | $(211.3) |
| Net loss | $(90.5) | $(109.9) | $(130.7) | $(202.9) |
| Net loss per share, basic and diluted | $(1.31) | $(1.87) | $(1.90) | $(3.46) |
- Q2 revenue increased about 42% year over year, primarily reflecting higher TIBSOVO sales. Six-month revenue more than doubled, mainly due to higher related-party collaboration revenue and TIBSOVO sales.
- Q2 research and development expense was $90.9 million, down from $107.4 million; six-month expense was $182.2 million, down from $203.0 million. Selling, general and administrative expense increased to $36.0 million in Q2 and $74.5 million for the half year.
- Cost of sales was $0.7 million in Q2 against $27.6 million of product revenue. This comparison is affected by certain manufacturing costs expensed before TIBSOVO’s approval.
- Six-month net cash used in operating activities was $173.2 million, versus $191.4 million a year earlier. Investing activities provided $130.6 million, largely reflecting marketable-security maturities and sales; financing activities provided $257.5 million.
- At June 30, cash and cash equivalents were $295.9 million and marketable securities were $498.6 million, totaling $794.4 million. Total liabilities were $417.7 million and stockholders’ equity was $558.5 million.
- Liabilities included $251.0 million related to the sale of future revenue, as well as operating lease liabilities of $108.5 million. The filing describes the royalty-sale obligation as debt financing; its estimated effective annual interest rate was approximately 16.4%. The filing does not report conventional borrowings in the presented balance-sheet figures.
Material changes and unusual items
- On June 11, Agios sold to Royalty Pharma its worldwide IDHIFA royalty rights and rights to up to $55 million of outstanding regulatory milestone payments for $255 million. Net proceeds after issuance costs were $250.5 million. Agios continues to co-promote IDHIFA and recognizes royalty revenue, including $1.65 million of non-cash royalty revenue in the period; the related liability is accreted as non-cash interest expense.
- Agios retains eligibility for a separate potential $25 million enasidenib milestone tied to a specified ex-U.S. commercial event, plus reimbursement for certain costs.
- Six-month related-party collaboration revenue rose to $65.8 million from $26.9 million. Management attributed the increase primarily to an updated estimate of costs to complete a performance obligation under the Celgene 2016 agreement after Celgene declined to extend the research term.
- Celgene declined to extend the 2016 research agreement, continue any program under it, or opt into development and commercialization of AG-270. The research services were fully satisfied by May 17, 2020; no further milestone payments are available under that agreement. Agios has sole rights to AG-270.
- Agios halted internal development of AG-636 due to limited clinical-trial enrollment and planned to wind down the study during 2020.
Outlook, risks and management commentary
- Management expected cash, cash equivalents and marketable securities, together with anticipated product revenue, interest income and collaboration reimbursements—but excluding additional program-specific milestones—to fund operating and capital needs through the end of December 2022. The filing also states that available resources were expected to cover operations for at least 12 months from issuance of the statements.
- Agios expects continued significant expenses and net losses. Future funding needs depend on development costs, TIBSOVO sales, collaboration outcomes, regulatory timelines and other factors. The company may seek equity or debt financing, collaborations or licensing arrangements; equity issuance could dilute shareholders. An ATM facility authorized up to $250 million remained entirely available at June 30.
- COVID-19 had disrupted some clinical operations, including enrollment timelines, though the company had not experienced significant direct financial or supply-chain effects as of June 30. Management expected enrollment completion for the AGILE Phase 3 study and the ivosidenib MDS trial arm in 2021, and an FDA supplemental application for TIBSOVO in cholangiocarcinoma in Q1 2021.
- Topline results from the mitapivat ACTIVATE and ACTIVATE-T trials were expected between the end of 2020 and mid-2021, subject to clinical-site access. Agios planned to start a Phase 1 AG-946 study in healthy volunteers in Q3 2020.
- Management cited clinical and regulatory uncertainty, enrollment and trial-completion risks, product commercialization and reimbursement risks, competition, reliance on third parties, and possible further COVID-19 disruption. Actual cash runway and future results may differ from estimates.
- Disclosure controls were judged effective at June 30, 2020. The filing reports that controls were updated for accounting and disclosure of the Royalty Pharma transaction.
Important facts for investors to verify
- Subsequent TIBSOVO sales growth, net pricing and commercial demand, including the contribution of rebates and other revenue reserves.
- Clinical-trial enrollment, data and regulatory milestones against the COVID-affected timelines disclosed in the filing.
- The assumptions underlying the royalty obligation’s estimated future payments and 16.4% effective interest rate, and the resulting future non-cash interest expense.
- Whether Agios achieves the stated runway through December 2022, given operating cash burn, product revenue and collaboration reimbursements.
- Potential dilution and capital availability under the $250 million ATM facility, which was unused as of June 30.
- The financial and pipeline effects of Celgene’s decisions not to extend or continue programs under the 2016 agreement, and Agios’s subsequent development plans for AG-270.