Agios Pharmaceuticals, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results; dollar amounts below are in millions unless stated otherwise. Agios is a biopharmaceutical company focused on genetically defined diseases. PYRUKYND (mitapivat), approved by the FDA in February 2022 for adults with hemolytic anemia due to PK deficiency, began U.S. commercialization during the period.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $5.6 | $0 | $6.4 | $0 |
| PYRUKYND net product revenue | $3.1 | $0 | $3.9 | $0 |
| Operating expenses | $103.2 | $91.2 | $205.2 | $182.4 |
| Loss from operations | $(97.6) | $(91.2) | $(198.8) | $(182.4) |
| Net income (loss) | $(91.8) | $(86.2) | $(186.6) | $1,788.1 |
| Net income (loss) per share, diluted | $(1.68) | $(1.41) | $(3.41) | $27.39 |
Q2 milestone revenue was $2.5 million, related to licensing intellectual property for a preclinical Friedreich’s ataxia program. Q2 cost of sales was $0.4 million. The filing does not provide a reported gross-margin percentage; launch-stage sales remain small relative to expenses.
Research and development expense rose 20% to $74.5 million in Q2 and 21% to $144.6 million for the first half, driven by clinical-program spending and compensation. Selling, general and administrative expense declined to $28.3 million in Q2 and $59.8 million for the first half, partly reflecting lower workforce-related costs. Royalty income from the sold oncology business was $2.7 million in Q2 and $5.4 million for the first half, from U.S. TIBSOVO sales by Servier.
- Cash flow: First-half operating cash use was $172.0 million, all from continuing operations. Investing activities provided $56.2 million, mainly as security maturities and sales exceeded purchases. Financing activities provided $1.1 million. Cash and cash equivalents declined $114.6 million to $88.5 million.
- Liquidity: Cash, cash equivalents and marketable securities totaled approximately $1.1 billion at June 30, 2022, down from approximately $1.3 billion at year-end 2021. Management expects resources to fund current operations for at least 12 months and to support its operating plan through major catalysts and to cash-flow positivity without additional equity, subject to assumptions and risks.
- Debt and obligations: The filing reports no material debt balance. Operating lease liabilities totaled $91.0 million; current and non-current lease obligations are included in liabilities.
- Other balance-sheet items: Total assets were $1.25 billion, total liabilities $128.4 million, and stockholders’ equity $1.12 billion. Accumulated deficit was $425.3 million. Available-for-sale securities had $10.6 million of unrealized losses at period-end; the company recorded no credit-loss allowance.
Material changes versus comparable periods
- Revenue began with the U.S. PYRUKYND launch; there was no product or milestone revenue in the 2021 periods shown.
- Continuing-operations losses increased year over year, principally due to higher R&D expense. First-half 2021 net income of $1.79 billion was largely attributable to the March 2021 oncology-business sale to Servier for approximately $1.8 billion; it is not a comparable recurring earnings result.
- First-half 2022 operating cash use was lower than the total $238.0 million used in the prior-year period, which included $78.8 million from discontinued operations. Continuing-operations operating cash use was $172.0 million versus $159.2 million.
- Accumulated other comprehensive loss increased, largely reflecting unrealized losses on available-for-sale securities as interest rates rose.
Outlook, management commentary and risks
- Management expects significant expenses and losses to continue while it advances PYRUKYND, AG-946 and research programs. R&D costs are expected to increase as programs progress; no specific revenue or earnings guidance is provided.
- The EMA review of PYRUKYND for adult PK deficiency was ongoing; management expected a decision by the end of 2022. PYRUKYND trials in thalassemia, sickle cell disease and pediatric PK deficiency were enrolling. The company expected meaningful enrollment in the thalassemia Phase 3 trials by year-end and completion of Phase 2 enrollment in RISE UP by year-end.
- Agios expected to initiate a Phase 2a study of AG-946 in adults with lower-risk MDS by year-end 2022. It also prioritized late lead-optimization programs in PKU and propionic/MMA and said it would prioritize in-licensing or acquiring assets for pipeline growth.
- In May, Agios announced a change to exploratory research and drug discovery, reducing approximately 45 roles while retaining teams for prioritized programs. It estimated average annual savings of approximately $40–$50 million from 2023 through 2026; actual savings and effects on execution remain uncertain.
- The company had repurchased 16.2 million shares for $802.5 million under its authorization and paused repurchases for the foreseeable future, prioritizing pipeline and potential business-development opportunities.
- Servier-related contingent proceeds include a potential $200 million milestone if specified vorasidenib FDA approval conditions are met before January 1, 2027, plus royalties on U.S. TIBSOVO and vorasidenib sales. The milestone and future royalties are uncertain; Agios said it could not estimate expected royalty amounts.
- COVID-19 had not caused a significant financial or supply-chain impact by quarter-end, but had disrupted some clinical and research activities and could delay enrollment or timelines. Key risks include commercial uptake, pricing and reimbursement, clinical-trial outcomes and enrollment, regulatory approvals, manufacturing dependence, competition, and the company’s continuing cash burn.
Important facts for investors to verify
- Whether PYRUKYND adoption, access and net sales grow sufficiently to offset ongoing operating losses.
- Regulatory and clinical progress for the EMA application and PYRUKYND and AG-946 trials, including enrollment and milestone timing.
- Actual cash burn, runway and progress toward management’s cash-flow-positivity expectation as R&D and commercialization spending evolve.
- Whether the announced research restructuring produces the estimated savings without materially impairing pipeline execution.
- Progress toward Servier’s contingent milestone and the amount and timing of royalty receipts; neither is assured.