Agios Pharmaceuticals, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Unaudited results; dollar amounts below are in millions unless stated otherwise. Agios is a biopharmaceutical company developing medicines for cancer and rare genetic diseases, and began generating product sales from TIBSOVO in 2018.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Total revenue | $26.2 | $40.4 | $56.4 | $49.2 |
| Product revenue, net | $13.7 | — | $22.9 | — |
| Operating expenses | $140.1 | $113.4 | $267.8 | $216.1 |
| Loss from operations | $(113.9) | $(72.9) | $(211.3) | $(167.0) |
| Net loss | $(109.9) | $(68.7) | $(202.9) | $(159.6) |
| Net loss per share, basic and diluted | $(1.87) | $(1.19) | $(3.46) | $(2.81) |
| Operating cash flow | Not stated by quarter | $(191.4) | $(166.4) |
- R&D expense rose 24% in Q2 and 23% for the first half; SG&A rose 22% and 25%, respectively. Product cost of sales was $0.3 million for Q2 and $0.6 million for the half year. A consolidated gross margin is not presented.
- At June 30, cash, cash equivalents and marketable securities totaled approximately $624.0 million, down from $805.4 million at year-end 2018. Current assets were $533.7 million and current liabilities $89.5 million.
- No borrowings or debt balance are reported. Operating lease liabilities were $116.5 million; undiscounted remaining lease commitments totaled $151.5 million.
- For the first half, investing activities provided $195.8 million, mainly reflecting net maturities and sales of marketable securities; financing activities provided $8.7 million, primarily employee stock-plan proceeds. Cash and cash equivalents increased $13.1 million to $83.6 million.
Material changes versus prior periods
- Q2 revenue fell 35%, despite $13.7 million of TIBSOVO sales, primarily because 2018 included a $15.0 million Celgene milestone and $12.4 million of CStone license revenue. For the first half, revenue increased 15%, supported by TIBSOVO sales and higher IDHIFA royalties, partly offset by lower collaboration revenue.
- Net loss widened by $41.1 million in Q2 and $43.4 million for the first half. Higher R&D and SG&A more than offset first-half revenue growth.
- First-half R&D increases included spending on ivosidenib, vorasidenib and mitapivat, plus a $2.0 million AG-636 milestone payment to Aurigene.
- Agios adopted the new lease accounting standard on January 1, 2019, recording $59.9 million of lease assets and $77.3 million of lease liabilities at adoption; the filing says adoption did not materially affect operating results.
Outlook, commentary and risks
- Management expects existing cash, cash equivalents and marketable securities, together with anticipated product and royalty revenue, interest income and collaboration reimbursements, to fund operating and capital needs through at least the end of 2020. This estimate excludes additional program-specific milestone payments and depends on assumptions; the filing also states liquidity is expected to cover at least the next 12 months.
- The company expects significant ongoing losses and increased spending as it advances clinical programs and commercializes TIBSOVO. It has no committed external funding source other than collaboration arrangements and may need additional capital.
- Key stated development objectives included submitting a TIBSOVO supplemental application for later-line IDH1-mutant cholangiocarcinoma by year-end 2019, after ClarIDHy met its primary endpoint, and initiating a phase 3 vorasidenib study in low-grade glioma by year-end 2019. These are plans, not assured outcomes.
- The FDA expanded TIBSOVO’s U.S. label in May 2019 to include certain newly diagnosed AML patients. Agios reported $13.7 million of Q2 net TIBSOVO sales.
- Risks include clinical-trial and regulatory uncertainty, commercialization and reimbursement challenges, competition, dependence on third-party manufacturers and collaborators, and the possibility that clinical costs or slower revenue growth shorten the cash runway. The anticipated Celgene-Bristol Myers Squibb transaction could affect collaborator priorities or personnel.
- Agios reported no material changes to internal control over financial reporting during the quarter and concluded disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether TIBSOVO sales growth, payer access and commercial execution support management’s revenue and cash-runway assumptions.
- Progress and timing of the planned cholangiocarcinoma filing and vorasidenib phase 3 trial, as well as results and enrollment across other major programs.
- Whether Celgene/BMS collaboration activity, reimbursements, royalties and potential milestones develop as expected.
- Cash consumption, future R&D and commercialization costs, and whether additional financing becomes necessary before the projected runway ends.
- The impact of lease commitments and the distinction between reported cash and cash equivalents ($83.6 million) and total liquidity including marketable securities ($624.0 million).