Agios Pharmaceuticals, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results. Agios is a rare-disease biopharmaceutical company commercializing PYRUKYND (mitapivat) and funding clinical and research programs. PYRUKYND is approved for adults with PK deficiency in the U.S., EU and Great Britain.
Key financial results
Amounts below are in millions, except per-share data and percentages.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $6.7 | $5.6 | $12.3 | $6.4 |
| PYRUKYND product revenue | $6.7 | $3.1 | $12.3 | $3.9 |
| Operating expenses | $100.4 | $103.2 | $196.6 | $205.2 |
| Research and development | $68.9 | $74.5 | $136.2 | $144.6 |
| Net loss | $(83.8) | $(91.8) | $(164.8) | $(186.6) |
| Net loss per share | $(1.51) | $(1.68) | $(2.97) | $(3.41) |
| Net cash used in operating activities | Not provided separately | Not provided separately | $(161.9) | $(172.0) |
- Q2 product revenue grew about 118% year over year; total revenue grew about 20%. Six-month product revenue more than tripled, while total revenue rose about 92%.
- Revenue in the 2022 comparison included $2.5 million of milestone revenue for the six-month period and $2.7 million of TIBSOVO royalty income in Q2 ($5.4 million for six months). No such milestone or royalty income was recorded in 2023.
- Q2 operating expenses declined $2.8 million, mainly from lower R&D costs, partly offset by higher selling, general and administrative expenses. Six-month operating expenses declined $8.6 million.
- Approximate product gross margin, calculated as product revenue less cost of sales, was 83% for Q2 and 87% for the first half. The filing notes some PYRUKYND manufacturing costs were expensed before approval and are not included in current-period cost of sales.
- Interest income, net, increased to $8.3 million in Q2 and $16.3 million for the first half, primarily reflecting higher interest rates.
Financial position and liquidity
- At June 30, 2023, cash and cash equivalents were $84.8 million and marketable securities were $862.2 million, totaling approximately $946.9 million in cash, cash equivalents and marketable securities. The comparable total at December 31, 2022 was approximately $1.10 billion.
- Total assets were $1.09 billion; total liabilities were $120.9 million; stockholders’ equity was $964.2 million. The filing reports no borrowings; liabilities primarily include operating leases.
- Operating lease liabilities totaled $78.9 million, including $14.3 million current. The company reported $90.1 million of undiscounted minimum lease commitments, partly offset by expected sublease receipts.
- Cash and cash equivalents decreased $54.5 million during the first half. Investing activities provided $104.7 million, mainly because proceeds from security maturities and sales exceeded purchases; financing activities provided $2.7 million.
- Management said existing cash, cash equivalents and marketable securities were expected to fund current operations for at least 12 months from issuance of the financial statements. The MD&A further projected funding through several value-creating milestones and at least into 2026, incorporating anticipated product revenue, interest income and the potential vorasidenib milestone.
Material changes, outlook and risks
- Management attributed higher PYRUKYND revenue to the ongoing U.S. launch. Commercial access in the EU and Great Britain was through a managed access program for eligible patients, free of charge; the company was evaluating potential commercial partnerships outside the U.S.
- R&D spending shifted toward PYRUKYND late-stage trials: first-half PYRUKYND program costs rose to $47.5 million from $36.1 million. Lower workforce-related, facilities and other research costs more than offset this increase, following changes to the research organization and a narrower focus on existing programs.
- In June, Agios reported that the phase 2 portion of the RISE UP sickle cell disease study met its hemoglobin-response endpoint. Management expected to begin phase 3 enrollment by year-end 2023. The ENERGIZE and ENERGIZE-T thalassemia trials had completed enrollment; pediatric PK deficiency trials were enrolling. Results from the AG-946 phase 2a LR MDS study were expected by year-end 2023, and an IND for the PAH-stabilizer PKU program was also expected by year-end.
- After quarter-end, Agios licensed Alnylam’s preclinical siRNA candidate targeting TMPRSS6 for potential treatment of polycythemia vera. The agreement requires a $17.5 million upfront payment and provides for up to $130 million in development and regulatory milestones, plus sales milestones and tiered royalties. Agios is responsible for development and commercialization costs.
- Agios continues to expect significant expenses and losses and did not provide quantified revenue or earnings guidance. Profitability depends on successful development and commercialization, including PYRUKYND uptake and clinical and regulatory outcomes. The potential $200 million vorasidenib approval milestone from Servier is contingent and not assured; future vorasidenib royalties are also uncertain. Agios sold its rights to future TIBSOVO royalties to Sagard in 2022.
- Key risks include clinical-trial efficacy, safety, enrollment and timing; commercial acceptance, pricing and reimbursement; competition; regulatory and manufacturing execution; dependence on CROs and third-party manufacturers; and the possibility that available capital is consumed faster than expected. COVID-19 had caused some CRO clinical and research disruptions, but Agios reported no significant direct financial or supply-chain impact as of June 30.
- Marketable securities had unrealized losses, but the company reported no credit-loss allowance and did not consider the securities impaired. Management noted exposure to interest-rate and foreign-currency changes; it did not hedge foreign-currency risk and considered a uniform 100-basis-point rate change unlikely to materially affect portfolio fair value.
Investor verification priorities
- Track PYRUKYND prescriptions, net revenue, access and reimbursement, particularly the contribution from U.S. commercialization versus managed-access programs abroad.
- Verify upcoming clinical milestones and results for RISE UP phase 3, ENERGIZE/ENERGIZE-T, pediatric PK deficiency, AG-946 LR MDS and the PAH-stabilizer program.
- Monitor quarterly operating cash use, investment balances and actual runway against management’s projection into at least 2026.
- Review the Alnylam program’s development costs and milestone and royalty obligations, as well as the uncertain timing and conditions for any Servier vorasidenib milestone or royalties.
- Assess whether expense reductions can be sustained while late-stage trials and commercial investment expand; the company remains loss-making and has an accumulated deficit of $635.4 million.