Agios Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Agios is a biopharmaceutical company focused on genetically defined diseases (GDDs). Following the March 31, 2021 sale of its oncology business to Servier, oncology results are reported as discontinued operations; continuing operations principally reflect research and development of the GDD portfolio.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development expense | $64.0 million | $51.9 million | $183.7 million | $161.4 million |
| Selling, general and administrative expense | $27.2 million | $28.3 million | $89.9 million | $89.2 million |
| Total operating expenses | $91.2 million | $80.3 million | $273.6 million | $250.6 million |
| Loss from continuing operations | $84.3 million | $79.2 million | $257.9 million | $244.8 million |
| Net (loss) income, including discontinued operations | $(88.8) million | $(99.0) million | $1,699.3 million | $(229.7) million |
- The continuing-operations income statement reports no product or collaboration revenue line; operating losses equal operating expenses. No meaningful revenue margin is provided. Royalty income from TIBSOVO and reimbursed transition services appear in other income or gain on sale.
- Q3 R&D expense rose $12.1 million year over year, mainly from mitapivat Phase 3 trial start-up and launch preparation. Nine-month R&D rose $22.3 million, including higher mitapivat and discovery-program spending. SG&A was slightly lower in Q3 and broadly flat year to date.
- Nine-month 2021 net income was driven primarily by the oncology divestiture, including a $1.989 billion pretax gain ($1.972 billion after tax) in discontinued operations—not recurring operating profitability. Q3 discontinued operations recorded a $4.5 million net loss.
- Cash and cash equivalents were $400.2 million; marketable securities totaled $996.0 million. Combined liquidity was approximately $1.396 billion at September 30, versus $670.5 million at December 31, 2020.
- Nine-month cash flows: $323.2 million used in operations ($234.1 million continuing operations); $1.343 billion provided by investing activities, primarily reflecting the approximately $1.803 billion oncology-sale proceeds; and $747.2 million used in financing, primarily share repurchases. Cash increased $272.8 million to $400.2 million.
- Total liabilities were $146.7 million, including $98.7 million of operating lease liabilities. The filing does not disclose material conventional borrowing debt. The oncology business’s future-revenue-sale liability was transferred as part of the sale.
- Agios repurchased 15.8 million shares for $783.4 million through September 30 under its $1.2 billion authorization. Treasury stock was recorded at cost; 54.7 million shares were outstanding at quarter-end.
Transaction, outlook, and key risks
- Servier paid approximately $1.8 billion at closing for the oncology business. Agios retained a potential $200 million payment if vorasidenib receives qualifying FDA approval before January 1, 2027, plus royalties on U.S. TIBSOVO sales and, if commercialized, vorasidenib sales. These contingent receipts are uncertain.
- Management said available cash, cash equivalents and marketable securities should fund operations for at least 12 months and support its operating plan through major catalysts and to cash-flow positivity without additional equity. Agios nevertheless expects significant expenses and losses while advancing its pipeline; it said losses may fluctuate.
- Mitapivat: the FDA accepted the NDA for adults with PK deficiency with priority review and a February 17, 2022 action date; the EMA review was ongoing. Phase 3 thalassemia trials had begun, a Phase 2/3 sickle-cell trial was expected to start by year-end 2021, and pediatric PK-deficiency pivotal trials were expected to begin in 2022. The filing reports positive pivotal-trial results, while emphasizing development and approval uncertainty.
- After quarter-end, Agios terminated its Rule 10b5-1 repurchase plan, adopted a Rule 10b-18 plan for remaining authorization, and said repurchases were paused as capital allocation shifted toward pipeline acceleration and potential business-development opportunities.
- Risks include clinical and regulatory failure or delay, patient enrollment and COVID-19-related disruption, dependence on third-party manufacturers and research organizations, competition, commercialization and reimbursement challenges, and uncertainty about Servier royalties and the vorasidenib milestone. Management reported no significant direct COVID-19 financial or supply-chain impact to date, but some clinical-operation disruptions.
Important facts for investors to verify
- FDA review milestones and outcome for mitapivat, including the February 17, 2022 PDUFA date, and progress of the EMA review.
- Clinical-trial execution, safety, enrollment, and data for mitapivat and AG-946, as well as the expected timing of planned trials.
- Cash burn and the assumptions behind management’s liquidity and cash-flow-positivity outlook, especially as R&D and commercialization spending develops.
- Actual Servier royalty receipts, any deductions or adjustments, and whether the qualifying vorasidenib milestone is achieved.
- Future capital allocation, including whether paused share repurchases resume and how remaining authorization is used.