Agios Pharmaceuticals, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Agios is a biopharmaceutical company developing treatments for cancer and rare genetic diseases; TIBSOVO (ivosidenib) was its first wholly owned commercial product.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Total revenue | $30.2 million | $8.8 million | Up 245% |
| Product revenue | $9.1 million | — | New, from TIBSOVO |
| Research and development | $95.6 million | $78.2 million | Up 22% |
| Selling, general and administrative | $31.8 million | $24.6 million | Up 29% |
| Operating loss | $97.5 million | $94.0 million | Loss widened $3.5 million |
| Net loss | $93.1 million | $90.8 million | Loss widened $2.3 million |
| Net loss per share | $1.59 | $1.63 | Loss per share narrowed |
| Operating cash flow | $(103.3) million | $(99.0) million | Cash use increased |
- Product revenue was $9.1 million; cost of sales was $0.3 million. Reported cost of sales excludes certain manufacturing costs expensed before TIBSOVO’s July 2018 approval.
- Revenue also included $17.9 million of related-party collaboration revenue, $1.0 million from CStone, and $2.2 million of royalties on IDHIFA sales. Interest income was $4.4 million.
- Cash, cash equivalents and marketable securities totaled $707.8 million at March 31, down from $805.4 million at December 31, 2018. Management expects these resources, anticipated revenues, interest and collaboration reimbursements—but excluding additional program milestones—to fund operations and capital expenditures through at least the end of 2020.
- Operating cash use was partly offset by $131.4 million of investing cash inflow, mainly net maturities and sales of marketable securities. Financing provided $4.9 million, primarily from employee stock plans. Cash and cash equivalents ended the quarter at $103.4 million.
- Total assets were $822.1 million and stockholders’ equity was $620.3 million. The balance sheet reports no debt; lease liabilities were $75.1 million. The accumulated deficit was $1.2 billion.
Material changes and developments
- Revenue rose substantially as TIBSOVO sales began and collaboration revenue from Celgene increased. Related-party collaboration revenue increased 144%, and royalty revenue increased 55% year over year.
- R&D spending increased to advance ivosidenib, mitapivat, vorasidenib and AG-636, among other programs. SG&A increased with TIBSOVO commercialization and personnel costs.
- Agios adopted the new lease accounting standard on January 1, 2019, recording $59.9 million of operating lease assets and $77.3 million of lease liabilities. Adoption did not materially affect the income statement.
- On April 11, 2019, Agios signed a lease for additional Cambridge office space, expected to begin May 1, and extended existing building leases through February 2028.
Outlook, commentary and risks
- Management expects continued significant expenses and operating losses as it advances clinical programs and commercializes TIBSOVO. It says additional funding may be needed; available financing could dilute shareholders, impose debt covenants or require granting rights to programs.
- Key expected events included an FDA action date of June 21, 2019 for the TIBSOVO supplemental application in newly diagnosed AML; ClarIDHy phase 3 top-line results expected in Q2 2019; and, if supportive, a cholangiocarcinoma supplemental application planned by year-end 2019. A vorasidenib phase 3 study was expected to start by year-end, and AG-270 dose expansion was expected to begin by Q3.
- Potential collaboration milestones were uncertain and excluded from the stated runway estimate. The next potential Celgene milestone cited was $35 million upon a specified ex-U.S. regulatory approval; the next CStone milestone cited was $5 million upon first-patient dosing in a local China study.
- Agios identified clinical, regulatory, safety, enrollment, manufacturing, reimbursement, competition, intellectual-property and financing risks. Its product revenue base remained early, and future revenue from IDHIFA depended on Celgene. Celgene’s proposed acquisition by Bristol Myers Squibb could affect management attention, personnel or program priorities.
- The company reported no off-balance-sheet arrangements, and management concluded disclosure controls were effective as of March 31, 2019.
Investor facts to verify
- Check TIBSOVO sales trends, access and reimbursement, and whether launch costs and net sales develop as expected.
- Track the June 2019 FDA action date and ClarIDHy results, along with the timing and outcome of subsequent filings and trials.
- Assess the assumptions behind the runway-through-2020 estimate, especially operating cash use, collaboration reimbursements and reliance on uncertain future revenue.
- Monitor Celgene/BMS transaction developments and any changes to collaboration funding, program execution or milestone prospects.
- Review the effect of additional lease commitments and expanding R&D and commercialization costs on future cash needs.