Agios Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2016. Financial statements are unaudited; amounts below are in millions of dollars except per-share data. Agios is a clinical-stage biopharmaceutical company developing therapies for cancer and rare genetic metabolic disorders. It had no product-sales revenue; substantially all revenue to date came from Celgene collaborations.
Financial performance and position
- Third quarter: Collaboration revenue was $9.0 million, up 64% from $5.5 million. Research and development expense rose 68% to $60.6 million; general and administrative expense rose 19% to $11.9 million. Operating loss was $63.5 million versus $40.5 million, and net loss was $62.8 million versus $40.3 million. Basic and diluted net loss per share was $1.63 versus $1.07.
- Nine months: Collaboration revenue was $47.2 million, down 11% from $52.9 million. The 2016 amount included a $25.0 million enasidenib development milestone; 2015 revenue included $26.2 million recognized upon delivery of AG-120 and AG-881 licenses. R&D expense increased 48% to $155.5 million and G&A expense increased 37% to $35.3 million. Operating loss was $143.6 million versus $77.8 million; net loss was $142.0 million versus $77.1 million. Loss per share was $3.72 versus $2.06.
- Cash flow: Net cash provided by operating activities was $89.8 million for the nine months, compared with $46.4 million used in 2015. The 2016 figure was driven chiefly by the $200 million Celgene upfront payment and other collaboration receipts, including cost reimbursements and the milestone payment; it should not be read as operating profitability. Investing activities used $41.8 million, while financing activities provided $165.8 million, primarily from the September stock offering.
- Liquidity and debt: Cash and cash equivalents were $285.5 million and marketable securities were $337.1 million at September 30, totaling $622.6 million, versus $375.9 million at year-end 2015. The balance sheet reports no debt. Current assets were $600.9 million and current liabilities $78.0 million. Management expected available funds, interest income and anticipated Celgene expense reimbursements—but excluding additional program-specific milestones—to fund operations and capital needs through at least the end of 2018.
- Funding and obligations: The September public offering generated $162.1 million net proceeds and increased shares outstanding. Deferred revenue related to Celgene was $210.4 million, including $36.4 million current. Contractual obligations to CROs and vendors were up to $65.6 million and generally cancelable on 30 days’ notice. No off-balance-sheet arrangements were reported.
Material developments and outlook
- In May 2016, Agios entered a new Celgene research and collaboration agreement and received a $200 million upfront payment. The agreement provides for research funding, designation and option fees, potential milestones and, depending on program structure, shared development costs and profits or royalties. The upfront payment is largely deferred revenue, recognized as performance obligations are met.
- Effective August 15, 2016, Agios regained global development and commercialization rights to AG-120 (IDH1 program) from Celgene. Agios expects to fund future development and commercialization costs; the parties have no continuing milestone or royalty obligations to one another for this program after specified cost reconciliation.
- Management expects expenses and operating losses to continue and increase as clinical development expands. R&D growth reflected advancing trials, increased internal staffing and costs, and greater Agios responsibility for AG-120. Agios reported an accumulated deficit of $426.7 million.
- Celgene said it expected to submit an NDA for enasidenib (AG-221) in relapsed or refractory AML by year-end 2016. Agios said AG-120 could follow a similar regulatory path, potentially with an NDA in 2017; it also planned a frontline IDH1 AML phase 3 trial in the first half of 2017 and a randomized AG-120 cholangiocarcinoma trial in the second half of 2016. These are plans, not assured outcomes. The filing stated that no additional collaboration milestones were expected in the near term.
- Clinical-stage risks remain material. Trial results cited include preliminary data, and safety signals included treatment-related serious adverse events in the enasidenib study and a Grade 2 low platelet count in one AG-519 study subject. The filing cautions that early results may not predict later-stage outcomes.
- Other principal risks include clinical or regulatory delays or failure, patient-enrollment challenges, reliance on Celgene and third-party research and manufacturing providers, competition, intellectual-property disputes, and the need for future funding. Management stated that a 10% immediate interest-rate change was not expected to materially affect the investment portfolio; the company did not hedge foreign-currency exposure.
Most important facts for investors to verify
- Progress and regulatory timing for enasidenib and AG-120, including whether planned NDA submissions and trials proceed as expected.
- Clinical efficacy, durability and safety results for the IDH programs and PK-deficiency candidates AG-348 and AG-519.
- How the Celgene upfront payment and other deferred revenue convert to recognized revenue, and the timing and extent of future reimbursements, fees and milestones.
- Cash use and runway against management’s end-of-2018 estimate, particularly as Agios funds AG-120 and expands development programs.
- Effects of the September equity offering, ongoing stock-based compensation and future financing needs on shareholder dilution.