Agios Pharmaceuticals, Inc. — 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed February 14, 2018. Agios is a clinical-stage biopharmaceutical company focused on cellular metabolism, cancer and rare genetic diseases. IDHIFA (enasidenib), commercialized by collaboration partner Celgene, was its first approved product; Agios reported no product-sales revenue.
Financial performance and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Total revenue | $43.0 million | $69.9 million |
| Research and development expense, net | $292.7 million | $220.2 million |
| General and administrative expense | $71.1 million | $50.7 million |
| Operating loss | $320.8 million | $201.0 million |
| Net loss | $314.7 million | $198.5 million |
| Net loss per share, basic and diluted | $6.75 | $5.07 |
| Operating cash flow | $(285.2) million | $38.6 million |
- FY 2017 revenue comprised $41.1 million of Celgene collaboration revenue and $1.9 million of IDHIFA royalties. Revenue declined 38.5%, principally because 2016 included a $25 million IDHENTIFY trial milestone and different collaboration-revenue recognition.
- R&D expense rose 32.9%, driven mainly by ivosidenib, AG-348 and AG-270 development. G&A increased 40.2%, largely to support commercialization and potential launches.
- At year-end, cash, cash equivalents and marketable securities totaled $567.8 million, versus $573.6 million a year earlier. Current assets were $445.3 million and current liabilities $94.9 million. The filing reports no debt balance; total liabilities were $238.9 million, including deferred collaboration revenue and lease-related liabilities.
- Financing cash flow was $285.1 million, mainly from the April 2017 equity offering, which generated $270.2 million net. Investing cash flow was $(57.9) million. FY 2017 cash and cash equivalents decreased $58.0 million.
- Contractual operating lease payments totaled $95.9 million, including $11.3 million due within one year. No off-balance-sheet arrangements were reported.
Fourth-quarter results
Unaudited Q4 2017 revenue was $9.8 million, operating loss $90.1 million, net loss $88.3 million and loss per share $1.81. Q4 2016 revenue was $22.6 million, operating loss $57.4 million, net loss $56.5 million and loss per share $1.34.
Material developments, outlook and risks
- FDA approved IDHIFA in August 2017 for adults with relapsed or refractory AML and an IDH2 mutation. Celgene leads and funds its development and commercialization; Agios earned $1.9 million in 2017 royalties and may receive additional milestones and tiered royalties.
- Agios submitted an NDA for ivosidenib for IDH1-mutated relapsed or refractory AML in December 2017. It planned an EMA application in Q4 2018 and was advancing Phase 3 studies in AML and cholangiocarcinoma. These were plans, not approvals or assured outcomes.
- AG-348 was in Phase 2; the company planned pivotal ACTIVATE and ACTIVATE-T studies in 2018. AG-270 was cleared to proceed to a Phase 1 trial, and Agios planned an IND submission for a DHODH inhibitor in Q4 2018. AG-519 development was discontinued after an FDA clinical-hold notification related to drug-induced cholestatic hepatitis.
- Management expected year-end 2017 cash and securities, January 2018 offering proceeds, anticipated revenue, interest and collaboration reimbursements—but excluding additional program-specific milestones—to fund operating and capital needs through at least the end of 2020. The January 2018 offering generated $516.2 million net after full exercise of the underwriters’ option; it occurred after the reporting date.
- Agios remained loss-making, with an accumulated deficit of $798.1 million, and expected significant further R&D spending and losses. Funding needs depend on clinical results, regulatory decisions, commercialization costs and collaboration activity. Future capital raising could dilute shareholders.
- Key risks include clinical-trial failure or delay, safety findings, difficulty enrolling rare-disease and biomarker-defined patients, regulatory and reimbursement uncertainty, competition, reliance on third-party manufacturers without redundant supply, and dependence on Celgene for IDHIFA and collaboration programs. IDHIFA’s label includes a warning for potentially fatal differentiation syndrome.
- The Tax Cuts and Jobs Act led to a $90 million deferred-tax remeasurement provision offset by a valuation allowance, with no net impact on the financial statements. Agios adopted the new revenue standard on January 1, 2018 and preliminarily estimated a $30 million reduction in deferred revenue with an offset to accumulated deficit; the final adjustment could differ.
- PwC issued unqualified opinions on the 2017 financial statements and internal control over financial reporting; management also concluded controls were effective. The company reported no material legal proceedings at year-end.
Important facts for investors to verify
- Current FDA and EMA status, clinical evidence and safety profile for ivosidenib, and progress and outcomes of its registration-enabling trials.
- IDHIFA commercial sales, Agios’s royalty receipts, Celgene’s development and commercialization commitments, and any milestone eligibility.
- Actual cash burn and runway versus management’s end-2020 estimate, including the effect of the January 2018 offering and future trial or launch spending.
- Enrollment, efficacy and safety outcomes for AG-348’s planned pivotal studies, and progress of AG-270 and the DHODH program.
- Final effects of revenue-standard adoption, as well as future collaboration revenue, reimbursements and any milestone-dependent cash flows.