Agios Pharmaceuticals, Inc. — Q3 2017 Form 10-Q
Reporting period: Three and nine months ended September 30, 2017. Unaudited consolidated results. Agios is a clinical-stage biopharmaceutical company focused on cellular metabolism; it had no product sales, and substantially all revenue came from Celgene collaborations and related royalties.
Financial results and liquidity
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $11.4 million | $9.0 million | $33.2 million | $47.2 million |
| Operating expenses | $90.4 million | $72.5 million | $263.9 million | $190.8 million |
| Operating loss | $79.0 million | $63.5 million | $230.7 million | $143.6 million |
| Net loss | $77.1 million | $62.8 million | $226.4 million | $142.0 million |
| Net loss per share, diluted | $1.59 | $1.63 | $4.94 | $3.72 |
- Revenue mix: Q3 collaboration revenue was $10.6 million and royalty revenue was $0.7 million. Nine-month collaboration revenue was $32.5 million and royalty revenue was $0.7 million.
- Cash flows, nine months: Operating cash used was $210.8 million; investing cash used was $99.8 million; financing cash provided was $282.5 million. Cash and cash equivalents fell by $28.0 million to $132.7 million.
- Liquidity at September 30: Cash, cash equivalents and marketable securities totaled $641.7 million. Total assets were $687.2 million; total liabilities were $237.4 million. The filing reports no debt balance.
- Margins: Not meaningful as a conventional operating measure given the company’s substantial operating losses and collaboration-based revenue.
- In April 2017, Agios raised $270.2 million net from a common-stock offering. Accumulated deficit was $709.8 million.
Changes versus the prior comparable period
- Q3 revenue increased 26%, while net loss widened 23%. Research and development expense rose 20% and general and administrative expense rose 47%.
- For the nine months, revenue declined 30%, while net loss widened 59%. The prior-year period included a $25.0 million milestone payment for initiation of the IDHIFA Phase 3 IDHENTIFY trial; no milestones were earned in the first nine months of 2017.
- Nine-month R&D expense increased 39%, reflecting expanded clinical and development activity, including ivosidenib and AG-348. Agios cited higher clinical costs, staffing and facilities needs. The company assumed global development costs for ivosidenib after regaining worldwide rights in 2016.
- G&A expense growth was attributed primarily to building commercial capabilities for IDHIFA and a potential ivosidenib launch.
Outlook, commentary and risks
- Management expected existing cash, cash equivalents and marketable securities, together with anticipated interest income, expense reimbursements and royalties—but excluding additional program-specific milestones—to fund operations and capital needs through at least the end of 2019. This estimate depends on assumptions and may prove inaccurate.
- Agios expected significant expenses and operating losses for the foreseeable future and said it would need substantial additional funding. Its only committed potential external funding source was its Celgene collaborations; future milestone and reimbursement receipts were uncertain.
- Agios expected to submit an ivosidenib NDA for IDH1-mutant relapsed/refractory AML by the end of 2017; planned to begin two pivotal AG-348 trials in pyruvate kinase deficiency in the first half of 2018; and expected to submit an IND for AG-270 by the end of 2017. These were forward-looking plans, not assured outcomes.
- The FDA approved Celgene’s IDHIFA for adults with relapsed or refractory AML carrying an IDH2 mutation on August 1, 2017. Agios reported $0.7 million in related royalty revenue for the nine months.
- Celgene designated AG-270 as a development candidate in March 2017, paying an $8.0 million designation fee. Celgene retained an option to develop and commercialize the program.
- AG-519 development was discontinued after an FDA clinical hold following a case of drug-induced cholestatic hepatitis. The filing cautions that clinical, regulatory, safety, enrollment and commercialization outcomes for other candidates remain uncertain.
- Agios planned to adopt the new revenue standard on January 1, 2018 using the modified retrospective method and was still assessing the impact; adoption could materially affect revenue recognition and reporting controls.
- Market risks include potential declines in investment values if interest rates rise and unhedged foreign-currency exposure on certain CRO contracts. The filing said a 10% interest-rate change was not expected to materially affect portfolio fair value. No off-balance-sheet arrangements were reported.
Investor facts to verify
- Whether the ivosidenib NDA was submitted on the anticipated timeline and the outcome and timing of FDA review.
- Enrollment, safety and results of key ivosidenib and AG-348 trials, and progress toward the planned AG-270 IND.
- Whether IDHIFA generates meaningful royalties and whether Celgene exercises its AG-270 option or other collaboration options.
- Actual cash burn versus management’s end-of-2019 runway estimate, including the effect of clinical expansion and commercial spending.
- The eventual financial-statement impact of adopting the new revenue-recognition standard and the effect of collaboration concentration on reported revenue.