Agios Pharmaceuticals, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; unaudited. Agios is a clinical-stage biopharmaceutical company focused on cellular metabolism, including cancer, rare genetic diseases and metabolic immuno-oncology. It had no product-sales revenue; collaboration agreements, primarily with related party Celgene, generated substantially all revenue.
Financial performance and liquidity
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Collaboration revenue | $10.5 million | $31.3 million; down 66% |
| Research and development expense, net | $62.7 million | $44.0 million; up 42% |
| General and administrative expense | $14.8 million | $10.8 million; up 37% |
| Operating loss | $67.0 million | $23.6 million |
| Net loss | $66.2 million; $1.56 per share | $23.2 million; $0.61 per share |
| Cash used in operating activities | $74.1 million | $19.0 million |
At March 31, cash and cash equivalents were $200.3 million and marketable securities totaled $302.9 million, or approximately $503.2 million combined. Current assets were $506.9 million against current liabilities of $82.4 million. The filing reports no debt balance; deferred revenue is primarily related to Celgene and is not debt. No product gross margin is reported, and margins are not meaningful absent product sales.
Management expected existing cash, securities, anticipated interest income and collaboration expense reimbursements, together with proceeds from the April 2017 stock offering, to fund operating and capital needs through at least the end of 2019, excluding additional program-specific milestone payments. Cash flow from investing was positive $109.6 million, mainly reflecting marketable-security maturities and sales, rather than operating cash generation.
Material changes and notable items
- Revenue fell by $20.8 million year over year. Q1 2016 included a $25.0 million IDHIFA milestone; Q1 2017 included $1.5 million of recognized AG-270 designation consideration. Agios also received an $8.0 million AG-270 designation fee during Q1 2017.
- R&D costs rose, particularly for ivosidenib, as Agios funded global development following the return of worldwide rights from Celgene. The 2016 comparison included a $6.6 million reimbursement-related reduction in ivosidenib R&D expense that did not recur.
- Cash, cash equivalents and marketable securities declined from $573.6 million at year-end 2016 to $503.2 million at March 31, 2017. In April, after quarter-end, Agios completed an offering of 5,808,080 shares, including the exercised overallotment, for net proceeds of $270.2 million.
- Accumulated deficit was $549.6 million. The company continued to report significant losses and expected expenses and operating losses to increase as clinical development and potential commercialization activities expanded.
Outlook, pipeline and risks
- Celgene’s IDHIFA (enasidenib) NDA for relapsed or refractory AML received FDA acceptance with priority review; the stated PDUFA action date was August 30, 2017. Agios expected to submit an ivosidenib NDA for IDH1-mutant relapsed or refractory AML by year-end 2017, and planned to initiate the AGILE Phase 3 trial in the first half of 2017.
- Agios expected to submit an IND for AG-270 by year-end 2017. Celgene held an option to develop and commercialize AG-270 for an option fee of at least $30 million. AG-348 was advancing toward pivotal development for pyruvate kinase deficiency.
- Agios emphasized that clinical, regulatory and commercial outcomes are uncertain. Key risks include trial enrollment and results, safety findings, regulatory approval, manufacturing and supply, competition, intellectual-property protection, and dependence on collaborators. The company had withdrawn AG-519 after FDA notification of a clinical hold associated with a case of drug-induced cholestatic hepatitis.
- Celgene collaborations are a major source of funding and potential milestone revenue; payments depend on development, regulatory and commercial outcomes. The filing states that Agios had no committed external funding source other than its collaborations.
- Agios reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no off-balance-sheet arrangements.
- After quarter-end, Agios entered an Aurigene license agreement involving an undisclosed cancer-metabolism target: $3.0 million upfront, potential milestones of up to $17.0 million per licensed product, and low-single-digit royalties.
Key investor verification points
- Check subsequent FDA decisions and clinical outcomes for IDHIFA and ivosidenib, including the stated IDHIFA action date and the planned ivosidenib submission.
- Track whether management’s stated funding runway through at least year-end 2019 is supported by actual spending, collaboration reimbursements and the April offering proceeds.
- Assess the growth in R&D spending and operating cash burn against development progress, particularly for ivosidenib, AG-348 and AG-270.
- Review Celgene option, milestone, cost-sharing and termination terms, and the timing and variability of collaboration revenue recognition.
- Monitor clinical safety and enrollment risks, including the AG-519 hold, and the potential dilution from the April share offering and equity compensation.