Agios Pharmaceuticals, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; quarterly figures below include the three months ended December 31, 2018. Agios is a biopharmaceutical company focused on cellular metabolism, with programs in cancer and rare genetic diseases. TIBSOVO (ivosidenib) became its first wholly owned commercial product after FDA approval in July 2018; IDHIFA (enasidenib) is commercialized by Celgene, with Agios receiving royalties.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Total revenue | $94.4 million | $43.0 million |
| Net product revenue | $13.8 million | None reported |
| Research and development expense | $341.3 million | $292.7 million |
| Selling, general and administrative expense | $114.1 million | $71.1 million |
| Operating loss | $362.5 million | $320.8 million |
| Net loss | $346.0 million | $314.7 million |
| Net loss per share, diluted | $6.03 | $6.75 |
| Interest income | $16.5 million | $6.1 million |
FY 2018 revenue comprised $13.8 million of TIBSOVO product revenue, $60.7 million of Celgene collaboration revenue, $12.7 million of CStone collaboration revenue and $7.2 million of IDHIFA royalties. The filing reports an operating loss and does not present a meaningful consolidated operating margin. Reported cost of sales was $1.4 million; certain TIBSOVO manufacturing costs incurred before approval were expensed as R&D instead.
| Q4 metric | Q4 2018 | Q4 2017 |
|---|---|---|
| Total revenue | $30.0 million | $9.8 million |
| Operating loss | $96.4 million | $90.1 million |
| Net loss | $91.8 million | $88.3 million |
| Net loss per share, diluted | $1.58 | $1.81 |
At year-end, cash, cash equivalents and marketable securities totaled $805.4 million, versus $567.8 million a year earlier. Current assets were $613.8 million and current liabilities $93.5 million. Total liabilities were $170.9 million; the balance sheet reports no borrowings or other debt. Operating cash flow was negative $304.4 million; investing cash flow was negative $273.8 million; financing cash flow was positive $546.0 million, primarily reflecting $516.2 million net proceeds from a January 2018 stock offering. Management expected year-end resources, anticipated product and royalty revenue, interest income and collaboration reimbursements—but excluding additional program-specific milestones—to fund operations through at least the end of 2020.
Material changes versus prior periods
- Revenue more than doubled year over year, reflecting the TIBSOVO launch, CStone collaboration revenue and higher IDHIFA royalties, alongside Celgene collaboration revenue.
- Operating and net losses increased in dollars as R&D and commercial-related SG&A spending rose. R&D increased 16.6% and SG&A increased 60.5% year over year.
- Net loss per share improved from $6.75 to $6.03 despite the larger net loss, in part amid a higher weighted-average share count and greater interest income.
- Agios terminated its joint vorasidenib collaboration with Celgene in September 2018 and obtained sole global rights, subject to low-single-digit royalties to Celgene on future worldwide net sales. Celgene shared certain development costs only through year-end 2018.
- Agios adopted ASC 606 on January 1, 2018 using the modified retrospective method. The adoption increased FY 2018 reported revenue by $2.1 million and increased the reported net loss by $1.2 million versus the prior accounting method; it also reduced opening accumulated deficit by $39.5 million. Comparisons with 2017 are therefore affected by the accounting change.
Outlook, risks and notable items
- Management expected expenses to rise as it advanced clinical programs and commercialized TIBSOVO. It planned to initiate a registration-enabling phase 3 trial of vorasidenib in IDH1-mutant low-grade glioma by the end of 2019; complete enrollment in the pivotal mitapivat trials in 2019; and begin a phase 1 AG-636 trial in lymphoma in the first half of 2019.
- Agios submitted a TIBSOVO MAA in Europe for relapsed or refractory AML and an FDA supplemental application for newly diagnosed IDH1-mutant AML in December 2018. It planned to submit an FDA supplemental application for cholangiocarcinoma by year-end 2019, subject to a positive trial result.
- Agios remains loss-making, has an accumulated deficit of $1.1 billion and expects significant future expenses. Its liquidity runway is a management estimate dependent on assumptions; the company stated it may need additional financing, which could dilute shareholders or require it to relinquish rights.
- Key risks include clinical-trial failure or delay, safety findings, regulatory and reimbursement uncertainty, competition, reliance on third-party manufacturers without redundant supply, and dependence on collaborators. The planned Bristol Myers Squibb acquisition of Celgene could affect Celgene’s priorities, personnel or performance under collaboration agreements.
- Agios disclosed no material legal proceedings at December 31, 2018 and no off-balance-sheet arrangements. Operating lease obligations totaled $91.3 million; manufacturing commitments totaled $6.5 million. A further $2.0 million Aurigene milestone was expected upon initiation of the first DHODH phase 1 trial.
- The 2018 financial statements were audited, and the auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The filing reports effective disclosure controls and internal controls.
Important facts for investors to verify
- Subsequent TIBSOVO sales, net pricing, access and commercial uptake, and the timing and outcomes of pending or planned regulatory submissions and trials.
- Whether actual cash burn, collaboration reimbursements and royalties support management’s stated runway through at least 2020, and whether additional capital is required.
- How Celgene’s proposed acquisition by Bristol Myers Squibb affects IDHIFA royalties and the development, funding and governance of collaboration programs.
- The treatment of pre-approval TIBSOVO manufacturing costs in R&D and the effect of ASC 606 when comparing reported revenue and losses across periods.
- Potential clinical, manufacturing, reimbursement and intellectual-property developments that could materially change program costs, timelines or commercial prospects.