Summary
- Tibsovo sales, after weakness during launch, are ramping nicely.
- The therapy's label is likely to continue to be expanded for IDH1 mutant cancers.
- Mitapivat, if approved for PKD, could generate good revenue with orphan drug status.
Agios Pharmaceuticals (AGIO) is ramping sales of its approved cancer therapy Tibsovo quite nicely. It also has an impressive pipeline of potential therapies. Agios specializes in metabolic pathways, including developing proprietary technology to study the pathways. It has discovered targets within the pathways and develops drugs that treat those targets. This is a precision medicine approach that, for investors, means Agios has the capability to develop a nearly unlimited number of therapies over time. I believe that, with a little bit of luck, it will develop into a major pharmaceutical company and bring generous returns for long-term investors. The stock price is quite reasonable right now, with the main risk being future failures in the pipeline.
I will review the company's Q2 results with a focus on Tibsovo revenue. Then, I will focus on Mitapivat, which is the most likely next major driver of value. I will also recap the rest of the pipeline before summing all that against the current stock value.
Data by YChartsAgios Q2 2020 results
Agios Q2 2020 results were delivered on July 30. Revenue was $37.3 million, down 51% sequentially from $87.1 million and up 42% from $26.2 million year-earlier. Revenue fluctuations are usually because of collaboration accounting. More fundamental now that Agios is a commercial-stage company is Tibsovo revenue; see that analysis below. GAAP net income was negative $90.5 million, down sequentially from negative $40.3 million and up from negative $109.9 million year-earlier. GAAP diluted EPS was negative $1.31, down sequentially from negative $0.59 and up from negative $1.87 year-earlier.
Losses are not unusual for years even after a small pharmaceutical company starts making commercial sales. Not only is revenue invested in further drug development and sales capabilities, but new capital is usually thrown into the mix, if investors will provide it. Cost of sales was minimal in Q2 at $0.7 million, but $90.9 million was invested in R&D. $36 million was spent on general & administrative expense. I would like to see tighter ship in G&A, but I consider R&D spend likely to pay for itself somewhere down the road.
Most importantly, Agios ended the quarter with $794 million in cash and equivalents. That might be enough to finance R&D until revenue ramps to the breakeven point. If not, there will be dilution at some point in the future to raise cash. Also, Idhifa royalty rights and milestone payments have been sold to Royalty Pharma, so do not count Idhifa royalty revenue from Bristol-Myers Squibb (BMY) going forward.
