Agios Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Agios is a rare-disease biopharmaceutical company commercializing PYRUKYND (mitapivat) and developing additional therapies. Comparisons below are with Q1 2022 unless otherwise noted.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Product revenue | $5.6 million | $0.8 million; up $4.8 million as PYRUKYND sales ramped |
| Cost of sales | $0.6 million | $0.3 million |
| Research and development | $67.3 million | $70.1 million |
| Selling, general and administrative | $28.4 million | $31.5 million |
| Total operating expenses | $96.2 million | $102.0 million |
| Loss from operations | $90.6 million | $101.1 million |
| Net loss | $81.0 million | $94.8 million |
| Net loss per share, basic and diluted | $1.47 | $1.74 |
| Cash used in operating activities | $95.2 million | $97.7 million |
| Cash and cash equivalents | $104.1 million | $139.3 million at Dec. 31, 2022 |
| Cash, cash equivalents and marketable securities | $967.0 million | Approximately $1.1 billion at Dec. 31, 2022 |
Management said available cash, cash equivalents and marketable securities should fund current operations for at least the next 12 months from the financial statements’ issuance date. The company reported no borrowings in the presented balance sheet; operating lease liabilities totaled $82.3 million, including $14.0 million current. Total liabilities were $114.8 million and stockholders’ equity was $1.04 billion at March 31, 2023.
Cost of sales was $0.6 million against $5.6 million of product revenue. A simple revenue-minus-cost-of-sales calculation implies a 90% gross margin, but Agios notes that certain manufacturing costs had been expensed before product approval and therefore are not included in cost of sales; this measure may not represent ongoing product economics.
Changes versus the prior period
- Revenue increased as U.S. sales of PYRUKYND continued following its February 2022 FDA approval.
- Net loss narrowed by $13.8 million, aided by higher interest income, increased product revenue and lower operating expenses. These benefits were partly offset by the absence of prior-year TIBSOVO royalty income.
- Interest income, net rose to $8.1 million from $0.7 million, primarily due to higher interest rates. Q1 2022 included $2.7 million of royalty income from the oncology-business sale; no such income was recorded in Q1 2023 after Agios sold its future TIBSOVO royalty rights to Sagard in 2022.
- R&D declined $2.8 million, mainly because of lower exploratory research and completed Servier transition services, partly offset by higher PYRUKYND trial spending. SG&A declined $3.1 million, primarily due to lower workforce-related costs.
- Operating cash use remained substantial at $95.2 million. Cash and cash equivalents fell $35.1 million during the quarter; investment maturities and sales exceeded purchases, producing $57.6 million of investing cash inflow.
Outlook, programs and principal risks
- Outlook: Agios expects significant expenses and net losses to continue as it advances clinical programs and commercializes PYRUKYND. It expects R&D costs to increase as development progresses; it provided no specific revenue, earnings or expense guidance in the supplied filing text.
- Clinical milestones: The phase 2 portion of the RISE UP sickle cell disease study was fully enrolled; Agios expected to report data and decide whether to initiate phase 3 by mid-2023. It expected to enroll at least half of the pediatric PK-deficiency trial participants by year-end 2023, complete enrollment in the AG-946 lower-risk MDS phase 2a study by year-end 2023, and file an IND for its PAH stabilizer for PKU by year-end 2023. These are forward-looking expectations, not reported outcomes.
- Portfolio: PYRUKYND is approved for adults with PK deficiency in the U.S., EU and Great Britain. The company is evaluating it in thalassemia, sickle cell disease and pediatric PK deficiency. AG-946 is in development for lower-risk MDS and hemolytic anemias. Agios is exploring partnership options for commercialization outside the U.S.; eligible patients in the EU and Great Britain have access through a free managed-access program.
- Strategy and costs: Agios said it was focusing exploratory research on existing late-lead optimization programs; it disclosed a reduction of approximately 45 exploratory-research roles. It also expects commercial and development costs to rise as programs advance.
- Contingent consideration: Agios may receive a $200 million payment if vorasidenib meets specified FDA approval conditions before January 1, 2027, plus royalties on U.S. vorasidenib sales if commercialized. The milestone and royalties are uncertain and depend on clinical, regulatory and commercial outcomes. The future TIBSOVO royalty rights were sold to Sagard in October 2022.
- Key risks: Commercial uptake, reimbursement and pricing for PYRUKYND; clinical-trial success, enrollment and regulatory approval; reliance on third-party manufacturers and CROs; competition; and the company’s concentrated rare-disease portfolio. Agios reported some clinical and research disruptions at CROs related to COVID-19, but no significant direct financial or supply-chain impact as of March 31, 2023. It also faces interest-rate risk on investments and unhedged foreign-currency exposure, which it said was immaterial at quarter-end.
- Controls: Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent PYRUKYND sales, patient access, payer coverage, net pricing and the sustainability of commercial growth.
- Whether the RISE UP data and phase 3 decision, pediatric-trial enrollment and AG-946/PAH-stabilizer milestones occurred on the stated timelines.
- Quarterly operating cash burn and whether the stated cash runway remains sufficient as clinical and commercialization spending evolves.
- The timing and probability of vorasidenib approval and any resulting milestone or royalty proceeds; these are not assured sources of funding.
- Potential effects of manufacturing costs excluded from reported cost of sales, revenue reserves, and the company’s reliance on third-party suppliers and research organizations.