Agios Pharmaceuticals(AGIO) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited financial statements, management's analysis, market risk disclosures, and internal controls for the reporting period Item 1. Financial Statements (Unaudited) Unaudited financial statements for H1 2019 report a $202.9 million net loss, $783.9 million total assets, and initial TIBSOVO® product revenue Condensed Consolidated Balance Sheets Balance sheet as of June 30, 2019, shows total assets at $783.9 million and stockholders' equity at $532.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash, cash equivalents and marketable securities | $624,039 | $805,421 | | Total Assets | $783,870 | $858,457 | | Total Liabilities | $251,193 | $170,920 | | Total Stockholders' Equity | $532,677 | $687,537 | Condensed Consolidated Statements of Operations Statements of operations for H1 2019 report $56.4 million total revenue and a $202.9 million net loss, driven by increased expenses Statement of Operations Summary (in thousands) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $13,727 | $— | $22,865 | $— | | Total revenue | $26,221 | $40,414 | $56,448 | $49,176 | | Research and development | $107,389 | $86,730 | $202,974 | $164,954 | | Selling, general and administrative | $32,390 | $26,633 | $64,181 | $51,183 | | Net loss | $(109,871) | $(68,745) | $(202,949) | $(159,570) | | Net loss per share | $(1.87) | $(1.19) | $(3.46) | $(2.81) | Condensed Consolidated Statements of Cash Flows Cash flow statements for H1 2019 show $191.4 million net cash used in operations and $195.8 million provided by investing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(191,422) | $(166,395) | | Net cash provided by (used in) investing activities | $195,832 | $(263,791) | | Net cash provided by financing activities | $8,668 | $537,785 | | Net change in cash and cash equivalents | $13,078 | $107,599 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, ASC 842 adoption, TIBSOVO® product revenue, collaboration revenue, and stock-based compensation - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of operating lease assets of $59.9 million and operating lease liabilities of $77.3 million[21] - Total net product revenue from U.S. sales of TIBSOVO® was $13.7 million for the three months and $22.9 million for the six months ended June 30, 2019[42] Revenue from Celgene Collaboration (in thousands) | Revenue Type | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Collaboration Revenue | $26,898 | $33,746 | | Royalty Revenue (IDHIFA®) | $4,903 | $2,990 | - Total stock-based compensation expense for the six months ended June 30, 2019 was $36.7 million, an increase from $31.0 million in the prior year period[67] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2019 financial performance, including increased revenue from TIBSOVO®, rising operating expenses, and liquidity to fund operations through 2020 Results of Operations Results of operations show a 15% revenue increase to $56.4 million, driven by TIBSOVO®, offset by higher R&D and SG&A expenses Financial Results Comparison for Six Months Ended June 30 (in thousands) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $56,448 | $49,176 | 15% | | Research and development | $202,974 | $164,954 | 23% | | Selling, general and administrative | $64,181 | $51,183 | 25% | | Net loss | $(202,949) | $(159,570) | 27% | R&D Expense by Program for Six Months Ended June 30 (in thousands) | Program | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Ivosidenib | $71,439 | $65,223 | 10% | | Vorasidenib | $14,461 | $7,478 | 93% | | Mitapivat | $40,193 | $27,719 | 45% | | AG-636 | $9,638 | $3,204 | 201% | | Other research | $52,243 | $43,747 | 19% | Liquidity and Capital Resources The company holds $624.0 million in liquidity, projected to fund operations through 2020, with $191.4 million net cash used in H1 2019 operations - The company expects its existing cash, cash equivalents and marketable securities of $624.0 million as of June 30, 2019, will be sufficient to fund operations through at least the end of 2020[96] - Net cash used in operating activities was $191.4 million for the six months ended June 30, 2019, an increase from $166.4 million in the prior year period, driven by higher clinical study and commercialization costs[95] Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures highlight interest rate sensitivity on the $624.0 million investment portfolio and unhedged foreign currency exposure - The company is exposed to interest rate sensitivity on its investment portfolio of $624.0 million as of June 30, 2019[100] - The company is also exposed to foreign currency exchange rate risk through contracts with CROs located in Asia and Europe, which are denominated in foreign currencies[100] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2019, with no material changes in internal control - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[102] PART II. OTHER INFORMATION This section outlines significant risk factors related to financial position, product development, third-party reliance, and intellectual property, alongside a list of exhibits Item 1A. Risk Factors The company details significant risks including financial losses, commercialization challenges, reliance on third parties, and intellectual property protection Risks Related to Financial Position and Need for Additional Capital The company faces risks from significant operating losses, an accumulated deficit of $1.3 billion, and the need for substantial additional capital - The company has incurred significant operating losses since inception, with an accumulated deficit of $1.3 billion as of June 30, 2019[105] - The company will need substantial additional funding and warns that if it is unable to raise capital when needed, it may be forced to delay, reduce, or eliminate product development or commercialization efforts[107][108] Risks Related to Discovery, Development, and Commercialization Risks include uncertainty in TIBSOVO® commercialization, potential clinical trial failures, and challenges in market acceptance and reimbursement for product candidates - The company's ability to generate product revenue depends heavily on the successful commercialization of TIBSOVO®, which faces numerous risks including safety, efficacy, manufacturing, and reimbursement challenges[112] - Clinical trials are expensive, lengthy, and uncertain; failure to demonstrate safety and efficacy, or experiencing significant delays, could prevent or delay the development and commercialization of product candidates[116][117] - Even if products receive marketing approval, they may fail to gain market acceptance from physicians, patients, and payors, which is necessary for commercial success[122] Risks Related to Dependence on Third Parties The company's success is highly dependent on third-party collaborators like Celgene and CStone, and on CROs and CMOs for clinical trials and manufacturing - The company is reliant on Celgene for the successful development and commercialization of IDHIFA®, and any failure by Celgene would substantially harm future prospects[128] - The company relies on third-party Contract Research Organizations (CROs) to conduct clinical trials and Contract Manufacturing Organizations (CMOs) for product supply, which increases risks related to quality, timeliness, and regulatory compliance[131][132] Risks Related to Intellectual Property Intellectual property risks involve challenges in obtaining and maintaining patent protection, potential litigation, and safeguarding trade secrets - The company's ability to successfully commercialize its products may be adversely affected if it is unable to obtain and maintain sufficient patent or trade secret protection[134] - The company may become involved in lawsuits to enforce its patents or defend against claims that it infringes on third-party intellectual property, which could be expensive, time-consuming, and unsuccessful[136][137] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including lease agreements and officer certifications - The report includes several new and amended lease agreements as exhibits, related to office space at 38, 88, and 64 Sidney Street in Cambridge, Massachusetts[165]