Agios Pharmaceuticals, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. The financial statements are unaudited. Agios is a biopharmaceutical company focused on cancer and rare genetic diseases; it had not generated product-sales revenue through June 30.
Financial performance and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Total revenue | $40.4 million | $11.3 million | $49.2 million | $21.9 million |
| Research and development expense | $86.7 million | $79.8 million | $165.0 million | $142.5 million |
| General and administrative expense | $26.6 million | $16.1 million | $51.2 million | $31.0 million |
| Operating loss | $72.9 million | $84.6 million | $167.0 million | $151.6 million |
| Net loss | $68.7 million | $83.1 million | $159.6 million | $149.2 million |
| Basic and diluted loss per share | $1.19 | $1.78 | $2.81 | $3.35 |
- Q2 revenue included $26.4 million of related-party collaboration revenue, $12.4 million from the CStone license, and $1.6 million of IDHIFA royalties. The Celgene collaboration amount included a $15.0 million milestone recognized after Celgene submitted an IDHIFA marketing application in Europe.
- First-half operating cash use was $166.4 million, compared with $133.1 million in 2017. Investing activities used $263.8 million, primarily reflecting purchases of marketable securities; financing provided $537.8 million, principally from a January public offering.
- At June 30, cash and cash equivalents were $210.3 million and marketable securities were $726.3 million, or approximately $936.6 million combined. Total assets were $998.2 million; total liabilities were $175.1 million and stockholders’ equity was $823.1 million. The balance sheet reports no debt.
- Revenue growth reduced the quarterly net loss year over year, but first-half net loss increased. R&D and G&A expenses rose, reflecting clinical-program activity and expansion of the commercial organization for TIBSOVO. Interest income increased to $7.4 million for the first half from $2.4 million.
Material developments, outlook, and risks
- Agios raised $516.2 million net in a January 2018 public offering. Common shares outstanding increased to 57.9 million at June 30 from 48.8 million at December 31, 2017.
- In June, Agios licensed TIBSOVO rights in mainland China, Hong Kong, Macau, and Taiwan to CStone. Agios received $12.0 million upfront, recognized $12.4 million of collaboration revenue under its accounting allocation, and may receive up to $412.0 million in development, regulatory, and sales milestones plus tiered royalties of 15%–19%.
- After quarter-end, on July 20, 2018, the FDA approved TIBSOVO for adults with relapsed or refractory AML with a susceptible IDH1 mutation. Agios planned to submit a European application in Q4 2018. Management also planned an IND filing for AG-636 in Q4 2018 and a phase 2 mitapivat trial in thalassemia in Q4 2018; pivotal mitapivat trials had begun in 2018.
- Management expected available cash, cash equivalents, and marketable securities, together with anticipated product and royalty revenue, interest income, and collaboration reimbursements—but excluding additional program-specific milestone payments—to fund operating and capital needs through at least the end of 2020. The filing also states that the company expects continuing losses and rising expenses, and that actual funding needs may differ.
- Key risks include clinical-trial and regulatory uncertainty, commercial execution and reimbursement for newly approved TIBSOVO, reliance on Celgene and CStone, competition, manufacturing and supply dependence, intellectual-property challenges, and the potential need for additional capital. Agios reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
- ASC 606 adoption affected reported collaboration revenue, expenses, deferred revenue, and accumulated deficit. The filing describes substantial judgment in estimating collaboration performance obligations and revenue recognition.
Investor verification priorities
- Verify the initial TIBSOVO launch, sales, reimbursement, and commercial costs following the July FDA approval; these are not reflected as product sales in Q2.
- Track IDHIFA royalties and the status of its European application, as well as the timing and collectability of collaboration milestones.
- Assess trial enrollment, results, regulatory milestones, and spending across pivotal mitapivat trials and the IDH, AG-270, and AG-636 programs.
- Reconcile cash burn and the stated end-of-2020 runway against actual product revenue, collaboration reimbursements, milestone receipts, and rising expenses.
- Review the CStone agreement’s development progress and any future milestone or royalty revenue, which depends on CStone’s performance.