Agios Pharmaceuticals, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019, including fourth-quarter results. Amounts are in U.S. dollars; financial figures are in millions unless noted.
Business context
Agios is a biopharmaceutical company focused on cellular metabolism, developing medicines for hematologic malignancies, solid tumors and rare genetic diseases. Its marketed products were TIBSOVO (ivosidenib), wholly owned, and IDHIFA (enasidenib), commercialized by Celgene, for which Agios earns royalties. Key development programs include vorasidenib, mitapivat, AG-270 and AG-636. Agios operates as one business segment.
Financial results and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $117.9 | $94.4 |
| Net product revenue, primarily TIBSOVO | $59.9 | $13.8 |
| Collaboration revenue | $47.5 | $73.3 |
| Royalty revenue | $10.5 | $7.2 |
| Research and development expense | $410.9 | $341.3 |
| Selling, general and administrative expense | $132.0 | $114.1 |
| Operating loss | $426.3 | $362.5 |
| Net loss | $411.5 | $346.0 |
| Net loss per share | $6.86 | $6.03 |
| Cash used in operating activities | $370.6 | $304.4 |
Fourth-quarter 2019 revenue was $35.4 million and net loss was $102.4 million, compared with $30.0 million and $91.8 million, respectively, in fourth-quarter 2018. Reported 2019 product gross margin was approximately 97.8%, based on net product revenue less reported cost of sales; management noted that some TIBSOVO manufacturing costs had been expensed before approval and therefore were not included in cost of sales.
At year-end, cash, cash equivalents and marketable securities totaled $717.8 million, versus $805.4 million a year earlier. Total assets were $890.7 million; total liabilities were $250.2 million, including $112.7 million of operating lease liabilities and $61.5 million of deferred revenue. The filing reports no conventional borrowings. Stockholders’ equity was $640.5 million. A November 2019 common-stock offering raised $277.2 million net and increased shares outstanding; no cash dividends were paid.
Material changes versus the prior year
- Revenue rose 24.9%, mainly as TIBSOVO generated a full year of sales versus a partial year in 2018. Product revenue increased by $46.0 million.
- Collaboration revenue from Celgene declined $21.4 million, primarily because 2018 included a $15.0 million milestone related to Celgene’s European filing for IDHIFA.
- Operating expenses increased $87.4 million, including a $69.6 million rise in R&D spending. Mitapivat, vorasidenib and other pipeline programs contributed to increased development costs; staffing and facilities costs also rose.
- Operating cash use increased $66.2 million. Year-end cash and marketable securities declined despite the 2019 equity offering.
- Agios adopted lease accounting guidance in 2019, recording operating lease assets of $93.6 million and operating lease liabilities of $112.7 million at year-end. The prior-year balance sheet was not restated.
Outlook, commentary and risks
- Management expected year-end 2019 cash, cash equivalents and marketable securities, together with anticipated product and royalty revenue, interest income and collaboration reimbursements, to fund operations and capital needs through at least the end of 2021. This estimate excludes additional collaboration-related payments and depends on assumptions that may prove inaccurate.
- Agios expected higher spending as it advanced clinical programs and commercialized TIBSOVO. It expected to complete enrollment in the AGILE phase 3 trial in 2020 and planned to submit an FDA supplemental application for TIBSOVO in previously treated IDH1-mutant cholangiocarcinoma by year-end 2020, following a positive primary endpoint in ClarIDHy.
- The company reported preliminary phase 2 mitapivat data in non-transfusion-dependent thalassemia, describing increased hemoglobin and reduced hemolysis. Further clinical results and regulatory outcomes remain uncertain.
- Celgene withdrew its European marketing application for IDHIFA in December 2019. Celgene became a wholly owned subsidiary of Bristol Myers Squibb in November 2019; Agios noted risks that the acquisition could affect collaboration priorities or personnel.
- Key risks include clinical-trial failure or delay, patient-enrollment challenges, product uptake and reimbursement, dependence on collaborators and contract manufacturers, competition, intellectual-property challenges, and the need for future capital. The company had incurred substantial losses since inception and stated it might not achieve profitability.
- Agios relies on third parties for manufacturing and had no redundant supply arrangement for bulk drug substance or finished drug product. It also identified possible disruption to suppliers and collaborators from public-health events, including the coronavirus outbreak affecting China and elsewhere.
Important facts for investors to verify
- Future TIBSOVO sales growth, net pricing, reimbursement and product-return or rebate assumptions.
- Clinical and regulatory progress for ClarIDHy, AGILE, mitapivat, vorasidenib, AG-270 and AG-636, including enrollment timelines and confirmatory evidence.
- Celgene/BMS and CStone performance, collaboration economics, and any changes to development priorities or milestone expectations.
- Cash burn, the assumptions underlying management’s stated runway through at least 2021, and potential dilution from additional financing.
- Lease commitments, manufacturing continuity and the sensitivity of collaboration revenue to management’s estimates of remaining R&D effort. The auditor identified Celgene collaboration R&D revenue estimates as a critical audit matter.