AGIOS PHARMACEUTICALS, INC. quarterly report, Q2 FY2021

Business context and reporting period

Agios Pharmaceuticals, Inc. is a biopharmaceutical company focused on genetically defined diseases. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021. On March 31, 2021, Agios sold its oncology business to Servier, shifting its focus to its remaining genetically defined disease programs. Oncology results are presented as discontinued operations.

Financial performance and position

• Six-month net income primarily reflects the approximately $1.98 billion after-tax gain on the oncology sale; it does not indicate recurring operating profitability. Q2 included a $2.0 million royalty-related gain and $6.5 million of transition-service and related income.
• Continuing-operations revenue is not presented as a separate line in the income statement; the filing does not provide a clear standalone continuing-revenue figure. Profit margins therefore are not meaningfully comparable from the information presented.
• Cash, cash equivalents and marketable securities totaled approximately $1.7 billion at June 30, 2021, versus approximately $670.5 million at December 31, 2020. Total liabilities were $152.8 million, including $100.9 million of operating lease liabilities. The filing reports no off-balance-sheet arrangements.
• Six-month operating cash use was $238.0 million, including $159.2 million from continuing operations and $78.8 million from discontinued operations. Investing activities provided $1.576 billion, largely reflecting sale proceeds; financing activities used $496.2 million, including $529.0 million of share repurchases. Cash and cash equivalents ended the period at $969.1 million.

Material changes versus the prior comparable period

• Q2 continuing-operations loss widened from $81.5 million in 2020 to $82.8 million in 2021; six-month continuing loss widened from $165.6 million to $173.7 million. Higher R&D expense was the main driver.
• Q2 R&D expense rose $7.9 million year over year, with mitapivat costs up $6.0 million; six-month R&D rose $10.2 million, with mitapivat costs up $8.6 million, principally for planned trials and filing and launch preparation.
• Q2 total net loss improved from $90.5 million to $86.2 million, while six-month results shifted from a $130.7 million net loss to $1.788 billion net income because of the oncology-sale gain.
• Agios repurchased 10.5 million shares for $529.0 million through June 30, including a $344.5 million purchase from Bristol Myers Squibb and approximately $184.5 million through a 10b5-1 plan. The repurchases reduced outstanding shares and cash.

Outlook, commentary and risks

• Management expects available cash and investments to fund the operating plan through major catalysts and to cash-flow positivity without additional equity financing; it also says funds should cover at least the next 12 months. These are forward-looking expectations, not assurances.
• Agios submitted an NDA to the FDA and an MAA to the EMA for mitapivat in adults with pyruvate kinase deficiency in June 2021. If approved, the company anticipated a potential U.S. and EU launch in 2022.
• Management reported that pivotal ACTIVATE and ACTIVATE-T trials met their primary endpoints in updated analyses. It expected to start phase 3 thalassemia trials in the second half of 2021, a phase 2/3 sickle-cell-disease trial by year-end 2021, and pediatric PK-deficiency pivotal trials in 2022.
• The Servier transaction included approximately $1.8 billion in closing cash, a potential $200 million vorasidenib approval milestone subject to specified conditions, and royalties on U.S. sales of TIBSOVO and, if commercialized, vorasidenib. Milestone and royalty amounts are uncertain and are not guaranteed.
• Key risks include clinical-trial success and enrollment, regulatory review, commercialization and market acceptance of mitapivat, dependence on third-party manufacturers, competition, and the company’s reduced diversification following the oncology sale. COVID-19 had caused some clinical-operation disruptions, though Agios reported no significant financial or supply-chain impact as of June 30, 2021.
• R&D and SG&A are expected to remain significant as Agios advances its pipeline and builds commercialization capabilities. The company has historically incurred losses and expects future losses; the six-month reported profit was substantially transaction-driven.

Important facts for investors to verify

• FDA and EMA review progress, timing and outcome for mitapivat, and whether the anticipated launch timing remains achievable.
• Full clinical data, safety profile, and execution of planned thalassemia, sickle-cell-disease and pediatric PK-deficiency trials.
• Actual Servier royalty receipts and whether the specified vorasidenib milestone conditions are met.
• Cash consumption, pipeline spending and management’s cash-flow-positivity assumptions, including the remaining share-repurchase authorization.
• Potential continuing effects of COVID-19, trial enrollment constraints, manufacturing dependence and competitive developments.