Agios Pharmaceuticals, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; unaudited. Agios is a biopharmaceutical company developing treatments for cancer and rare genetic diseases, and began commercializing TIBSOVO (ivosidenib) in 2018.
Financial highlights
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Total revenue | $26.0 million | $15.2 million | $82.5 million | $64.4 million |
| Product revenue, net | $17.4 million | $4.5 million | $40.3 million | $4.5 million |
| Research and development | $101.7 million | $82.6 million | $304.6 million | $247.5 million |
| Selling, general and administrative | $33.0 million | $31.1 million | $97.2 million | $82.3 million |
| Operating loss | $(109.1) million | $(99.2) million | $(320.4) million | $(266.1) million |
| Net loss | $(106.2) million | $(94.7) million | $(309.1) million | $(254.2) million |
| Net loss per share, basic and diluted | $(1.81) | $(1.63) | $(5.27) | $(4.45) |
| Cash used in operating activities | — | $(277.0) million | $(230.2) million |
- Revenue mix and change: Q3 revenue increased 71% year over year, mainly from TIBSOVO sales. Nine-month revenue rose 28%; product and IDHIFA royalty revenue grew, while collaboration revenue declined, including because 2018 included a $15.0 million Celgene milestone and CStone license revenue.
- Cash and liquidity: Cash, cash equivalents and marketable securities totaled $540.5 million at September 30, 2019, down from $805.4 million at December 31, 2018. Management expected these resources, together with anticipated product and royalty revenue, interest and collaboration reimbursements, to fund operating and capital needs through at least the end of 2020, excluding additional program-specific milestones. The notes also state resources were expected to cover at least the next 12 months from issuance.
- Balance sheet: Total assets were $698.6 million and stockholders’ equity was $448.3 million. The filing reports no borrowings or debt balance; operating lease liabilities were $115.4 million. Accumulated deficit was $1.4 billion.
- Margins: Cost of sales was $0.4 million in Q3 and $1.0 million for the nine months, against product revenue of $17.4 million and $40.3 million, respectively. The filing notes that certain TIBSOVO manufacturing costs incurred before approval were expensed as R&D, so current cost of sales alone may not represent ongoing product economics.
- Cash flow and financing: Investing activities provided $276.2 million in the first nine months, primarily because maturities and sales of securities exceeded purchases. Financing activities provided $12.0 million, principally from employee stock option exercises and the stock purchase plan; the comparable 2018 period included $516.2 million of net follow-on offering proceeds.
Business developments, outlook and risks
- TIBSOVO generated $40.3 million of net U.S. product revenue in the first nine months. FDA approval was expanded in May 2019 to include certain newly diagnosed AML patients. Agios said it planned to submit an application for TIBSOVO in IDH1-mutant cholangiocarcinoma by year-end 2019 after the ClarIDHy Phase 3 trial met its primary endpoint.
- Agios expected to initiate the registration-enabling INDIGO Phase 3 trial of vorasidenib in low-grade glioma by year-end 2019. It also advanced mitapivat trials in pyruvate kinase deficiency and thalassemia, and began combination testing of AG-270 in MTAP-deleted cancers.
- In October 2019, Agios submitted an option exercise package to Celgene for AG-270; Celgene had up to 150 days to decide whether to exercise its option.
- Management expected significant R&D and commercialization spending and continued operating losses. It said additional funding may be required; potential funding sources include equity, debt and collaborations, with dilution, restrictive terms or relinquishment of rights among the possible consequences.
- Material uncertainties include clinical-trial enrollment, safety and efficacy, regulatory approvals, product adoption and reimbursement, competition, manufacturing and intellectual-property protection. Agios also identified dependence on collaborators, including Celgene; the pending Bristol Myers Squibb acquisition of Celgene could affect collaborator priorities, personnel or programs.
- Other disclosed considerations include interest-rate exposure on investments, unhedged foreign-currency exposure on certain vendor contracts, and $149.4 million of undiscounted minimum lease commitments. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Subsequent TIBSOVO revenue, commercial uptake, net pricing and reimbursement trends.
- Whether the cholangiocarcinoma filing and INDIGO trial milestones occurred on the stated schedule, and subsequent clinical results.
- Celgene’s decision on the AG-270 option and any effects of the Celgene–Bristol Myers Squibb transaction on collaboration programs and receipts.
- Actual cash burn and liquidity runway relative to management’s projection through at least year-end 2020, including the impact of milestone timing and spending.
- Potential development, regulatory, safety, manufacturing, IP, competition and collaboration developments that could alter the pipeline or funding outlook.