Agios Pharmaceuticals, Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014. Financial statements are unaudited. Agios is an early-stage biopharmaceutical company developing therapies for cancer and inborn errors of metabolism; it had no product sales and substantially all revenue came from its Celgene collaboration. Dollar figures below are in millions unless stated otherwise.
Financial results and liquidity
- Revenue: $8.4, up 34% from $6.3 in Q1 2013. Revenue was collaboration revenue, not product sales.
- Expenses and losses: R&D was $17.4, up 52%; G&A was $3.3, up 78%. Operating loss was $12.3 versus $7.0; net loss was $12.2 versus $7.2, a 69% increase. Basic and diluted loss per share was $0.39, compared with $2.47 in Q1 2013; per-share comparison is affected by the 2013 IPO and conversion of preferred shares. Operating and net loss were each about 146% of revenue; conventional profitability margins are not meaningful for this pre-revenue company.
- Cash flow: Operating cash use was $27.0 versus $12.0 in Q1 2013. Investing activities used $12.3, principally because purchases of marketable securities exceeded maturities and sales. Financing provided $0.6. Cash and cash equivalents declined $38.7 to $32.8.
- Liquidity and balance sheet: Cash, cash equivalents and marketable securities totaled $167.3 at March 31, down from $193.9 at December 31, 2013. Total assets were $181.9; total liabilities were approximately $60.6, including deferred collaboration revenue. The filing reports no borrowings or debt balance. Stockholders’ equity was $121.3.
- Tax item: Agios paid $6.0 in federal taxes, interest and penalties during the quarter. It recorded $4.5 as refundable income taxes, including an expected $3.8 carryback refund and a $0.7 IRS abatement.
Changes versus the prior comparable period
- Revenue increased $2.1, primarily from recognizing revenue associated with Celgene’s December 2013 decision to extend the discovery phase through April 2015.
- Higher R&D reflected greater clinical, preclinical, manufacturing and platform-program activity, as well as increased staffing. G&A growth reflected hiring and public-company professional costs.
- Operating cash use more than doubled, reflecting higher losses and operating activity, the $6.0 tax payment, and working-capital movements, including a $2.1 increase in unbilled collaboration receivable.
Business developments, outlook and risks
- Pipeline: AG-221 (IDH2) was in a Phase 1 trial; two Phase 1 studies for AG-120 (IDH1) began in March 2014. AG-348 (pyruvate kinase deficiency) began a Phase 1 study in April 2014, after the quarter. Agios retained U.S. rights to AG-120 and worldwide rights to AG-348.
- AG-221 early data: In April 2014, Agios reported preliminary results from the ongoing dose-escalation study: among seven evaluable patients, six had investigator-assessed objective responses. The filing also reports disease-related deaths among patients in the early cohorts and possible drug-related severe adverse events in two of 22 enrolled patients as of March 20. These were early, small-cohort findings, not evidence of established efficacy or safety; dose escalation continued.
- Celgene collaboration: Agios recognized $8.4 of collaboration revenue in the quarter. It was entitled to a $20.0 extension payment expected in May 2014, and could receive another $20.0 if Celgene extends the discovery phase through April 2016. As of March 31, Agios had received no milestone or royalty payments under the agreement. Celgene holds development and commercialization options for certain programs.
- Cash outlook: Management expected resources to fund operations and capital expenditures until at least mid-2017, factoring in the quarter-end cash and securities, post-quarter equity proceeds of $94.7, the anticipated $20.0 Celgene payment, expected tax refunds, interest and collaboration expense reimbursements. This is a management estimate dependent on assumptions and development spending.
- Subsequent financing: In April, Agios sold 2.0 million shares and received $82.3 net; the underwriters’ May exercise for additional shares generated another $12.4 net. The filing describes total post-quarter net proceeds of $94.7.
- Key risks and commitments: Agios expects significant future losses and R&D spending and may require additional capital. Clinical, regulatory, manufacturing, intellectual-property and commercialization outcomes are uncertain; the company relies on Celgene and third-party research, clinical and manufacturing providers. Vendor commitments were up to $27.3 at March 31, generally cancelable on 30 days’ notice. The company reported no off-balance-sheet arrangements and said disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether the anticipated Celgene extension payment and tax refunds were received, and whether any further discovery extension or milestone payments followed.
- Subsequent clinical-trial data for AG-221, AG-120 and AG-348, including patient numbers, durability of responses, safety findings and trial progress.
- Actual cash burn and R&D spending against management’s mid-2017 runway estimate, including the impact of later financing and development plans.
- Celgene’s program and licensing decisions, cost-sharing obligations, and implications for Agios’s retained rights and future revenue.
- Changes in trial, vendor and manufacturing commitments, and any emerging regulatory, intellectual-property or other contingencies.