Agios Pharmaceuticals, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. Agios is a development-stage biopharmaceutical company focused on cellular metabolism in cancer and inherited metabolic diseases; it had no product sales.
Business and pipeline
- AG-221: IDH2-mutant cancer inhibitor; Phase 1 began in September 2013. Agios expected initial clinical data in April 2014. Celgene holds an option to license worldwide rights.
- AG-120: IDH1-mutant cancer inhibitor; Phase 1 began in March 2014, after year-end. Agios elected to retain U.S. development and commercial rights; Celgene has an option for ex-U.S. rights.
- AG-348: Candidate for pyruvate kinase deficiency; IND-enabling studies were completed, with Phase 1 trials planned for mid-2014. Agios holds worldwide rights.
- Celgene extended the collaboration discovery phase through April 2015, triggering a $20 million payment expected in May 2014. Agios reported approximately $141.2 million in cumulative collaboration payments and $50.3 million in Celgene equity investments through year-end.
Financial results and liquidity
| Metric (USD millions, except per-share data) | 2013 | 2012 | Change |
|---|---|---|---|
| Revenue | 25.5 | 25.1 | +1.8% |
| Research and development expense | 54.5 | 41.0 | +32.8% |
| General and administrative expense | 9.9 | 7.1 | +40.6% |
| Operating loss | (38.9) | (23.0) | Loss widened |
| Net loss | (39.4) | (20.1) | Loss widened |
| Net loss per share attributable to common stockholders | (2.83) | (8.02) | — |
| Net cash used in operating activities | 56.4 | 49.5 | Use increased |
All 2013 revenue was collaboration revenue, principally recognized over the Celgene agreement’s performance period; no milestone or royalty payments had been received by year-end. The company’s operating loss equaled about 152% of revenue. Research and development spending rose as clinical and preclinical work expanded, including a 2013 Phase 1 start for AG-221.
At December 31, 2013, cash, cash equivalents and marketable securities totaled $193.9 million (versus $128.0 million a year earlier); total assets were $201.2 million and total liabilities $69.7 million. The filing highlights no debt balance. Management expected available funds, the anticipated $20 million Celgene extension payment, interest income and collaboration expense reimbursements to support operations at least through the fourth quarter of 2016. No off-balance-sheet arrangements were reported.
Net cash provided by financing was $123.9 million, primarily from the IPO and concurrent Celgene-affiliate private placement. The IPO generated $111.0 million net proceeds; approximately $25.8 million had been used by year-end. Agios had an accumulated deficit of $113.4 million.
Changes, outlook and material risks
- Compared with 2012, R&D expense increased $13.5 million and G&A expense increased $2.9 million, while revenue rose only $0.4 million; net loss nearly doubled. Management expected expenses and losses to continue increasing as trials, research, hiring and public-company costs grew.
- Management cautioned that development costs, timing and outcomes are uncertain and that product revenue may not arise for many years, if at all. Continued funding may be needed; financing could dilute shareholders or require granting rights to programs.
- Key risks include early-stage clinical and regulatory uncertainty, trial enrollment and safety, dependence on Celgene and other collaborators, limited manufacturing supply and reliance on third parties, patent and trade-secret protection, and future reimbursement, pricing and competition.
- The Celgene relationship is significant: substantially all historical revenue came from the collaboration, and Celgene may terminate for convenience on 90 days’ notice. Agios’s U.S. rights to AG-120 entail its share of U.S.-specific development and commercialization costs.
- Unusual disclosure: the filing corrected previously reported 2013 third-quarter and nine-month common-stockholder loss-per-share figures because cumulative preferred dividends had been presented incorrectly. The company deemed the errors immaterial; the corrected 2013 Q3 figure was $(0.52), versus $(0.47) previously reported.
- Tax items included a $0.6 million 2013 provision, attributed to penalties and interest related to unpaid 2011 federal taxes; a $6.0 million tax payment was expected in early 2014, with a $3.8 million refund application planned.
Important facts for investors to verify
- Whether AG-221 and AG-120 clinical trials demonstrate safety, target engagement (including 2HG reduction), and meaningful efficacy—and whether timelines or plans change.
- Receipt and timing of the $20 million Celgene extension payment, Celgene’s program and licensing decisions, and the costs Agios bears for retained U.S. rights.
- Actual cash burn and runway against management’s forecast through Q4 2016, including the assumptions for reimbursements and collaboration funding.
- Clinical progress and trial readiness for AG-348, and whether planned mid-2014 initiation occurred.
- Potential dilution from equity compensation and future financing; common shares outstanding were 31.2 million at year-end, and 31.6 million as of March 14, 2014.