Agios Pharmaceuticals, Inc.
Q3 2014 Earnings Call Transcript

Published: 8 Nov 2014

[Operator:]

Good day ladies and gentlemen, and welcome to the Agios Pharmaceuticals Third Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Lora Pike. You may begin.

[Lora Pike:]

Thank you, Nova. Good morning everyone and welcome to the Agios’ third quarter 2014 conference call. You can listen to our live webcast with slides by going to the Investors and Media section of our website, agios.com. With me on the call today with prepared remarks are, Dr. David Schenkein, our Chief Executive Officer who will review our potential milestones for the remainder of the year; and Glenn Goddard, our Senior Vice President of Finance, who will summarize Agios’ third quarter 2014 financial results. Scott Biller, our Chief Scientific Officer; and Chris Bowden, our Chief Medical Officer are also here today and will join us for Q&A. Before we begin, I would like to remind you that today’s discussion will include statements about the company’s future expectations, plans and prospects that constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important risk factors, including those discussed in the Risk Factors section of our most recent quarterly report on Form 10-Q, which in on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. With that, I will turn the call over to David.

[David Schenkein:]

Thanks Lora. Good morning everybody and thank you for joining us on our third quarter conference call. Since we hosted an R&D Day less than three weeks ago, we decided today that our call today will be brief and focus on the remaining milestones in 2014. The presentations of data for all three of our clinical stage medicines and development at two major medical meetings. Let met summarize for you the kind of information you can expect to see in the next coming weeks at these medical meetings, but before I do, I would like to reflect on our progress so far this year. 2014 started with one investigational medicine, AG-221 in early clinical development and two AG-120 and AG-348 in preclinical development. Now with all three in clinical development, we’re excited about the milestones we’ve already achieved in 2014 and look forward to the milestones coming up for the remainder of the year, most notably, the data that will be presented for all three molecules. For AG-221, we will present additional data at ASH in December. For AG-120, we will present the first data from our hematologic study at the EORTC-NCI-AACR meeting in a couple of weeks in Barcelona. And for AG-348, the data from our Phase I healthy volunteer studies will also be presented at ASH. In summary, we remain on track to achieve all of our 2014 clinical milestones. You can see the progress, we’re making by looking on our portfolio of novel medicines. We’ve gone from a blank piece of paper less than six years ago to bringing three novel medicines all discovered and developed at Agios into clinical development and now with numerous ongoing clinical trials focused on patients with diseases that desperately need new treatments. We’re proud of we’ve been able to accomplish in such a short period of time. We understand that we have much more to do to bring our novel medicines rapidly to patients with serious diseases, and we continue to invest in our early discovery portfolio, and strengthen our team by hiring exceptional people to help us on our journey. Now to review of the upcoming data, which I will summarize in the order that the data will be presented. Starting first with AG-120 are orally available first-in-class selective and potent inhibitor of the mutated IDH1 protein. We retained U.S. development and commercialization rights for AG-120 under our agreement with Celgene, with Celgene retaining its option to license ex-U.S. rights. We are well underway in our two ongoing Phase I clinical trials in patients with an IDH1 mutation. One in advanced hematologic malignancies and one in advanced solid tumors. We announced in September that a late breaker abstract for AG-120 was accepted for an oral presentation at the EORTC-NCI-AACR meeting, also known as the Triple Conference. This represents the first clinical data disclosure for AG-120 and as an important milestone for us. The oral presentation which is scheduled to take place on Wednesday, November 19th at 2

[Glenn Goddard:]

Thanks, David. We’re on track to achieve all of our corporate and financial objectives for 2014. With our three clinical stage medicines rapidly advancing, approximately $238 million cash, and a great partnership with Celgene, we believe we are in a strong position to build a great multi-product biopharmaceutical company. During the third quarter, we invested aggressively in AG-221, AG-120, and AG-348 and at the same time we continued our commitment to invest in research to generate the next wave of novel programs. Now moving onto our financial results for the third quarter. As I just referenced, our cash, cash equivalents and investments as of September 30, 2014 were $238 million, compared to $194 million as of December 31, 2013. The increase was mainly driven by the addition of approximately $95 million from our public offering, and $20 million related to Celgene’s extension of the discovery phase of our collaboration through April of 2015. This was offset by cash used to fund operating activities with our three lead drug candidates in advanced and clinical development. During the third quarter of 2014, we began cost reimbursements for AG-221. As a reminder, Celgene is responsible for all development costs related to our AG-221 program and will reimburse us for all development costs incurred for this program. As of quarter end, we had recorded a receivable of approximately $19 million, which represents AG-221 development costs incurred to date. The payment for these cost were received in October, and going forward, we expect to be reimbursed quarterly for these costs. In the third quarter of 2014, we recognized $33.9 million of collaboration revenue compared to $6.3 million in the third quarter of 2013. The increase was due to the application of new accounting guidance for our agreement with Celgene. In July 2014, we amended our agreement to Celgene to modify the nature and timing of reimbursement payments for development activities we perform for license programs. In addition, we will be eligible to receive reimbursement for certain early-stage development activities for a split license program like AG-120. Prior to the amendment collaboration consideration was recognized ratably over our estimated performance period. Subsequent to the amendment, we were required to reevaluate the agreement under the current revenue recognition accounting guidance. Under this guidance, the value of all undelivered elements within the agreement were determined to be less than the combination of future consideration to be received, and the remaining deferred revenue balance of the amendment date. As a result, we immediately recognized revenues of approximately $25 million. Going forward, revenue will be recognized based on the completion of undelivered elements, which consist of items such as the AG-120 ex-U.S. license, development services for ongoing Phase I studies and ongoing research efforts. Research and development expenses were $25.5 million for the third quarter of 2014 compared to $14.8 million in the third quarter of 2013. The increase was largely due to increased spending on ongoing development activities for our three lead programs now in the clinic. General and administration expenses were $5.2 million in the third quarter of 2014, compared to $2.5 million in the third quarter of 2013. The increase was largely related to increased headcount and other professional expenses as we strengthened our team to support our growing operations. Today, we’re also updating our previous guidance on our year-end cash position. We now expect to end 2015 with more than $220 million of cash, cash equivalents and marketable securities. And with that, I will now turn the call back over to David.

[David Schenkein:]

Thanks Glenn. So in summary, we’re extremely pleased with the significant progress that has been made across all areas of Agios in 2014. We expect the remainder of the year to be highlighted by the major clinical data presentations. We’re looking forward to this, and the potential they represent for patients, the company, our employees, and our shareholders. We look forward to keeping you updated on our future call and we want to thank you for all of your continued support. And with that, we’ll now go to questions.

[Operator:]

(Operator Instructions) Our first question comes from the line of Terence Flynn of Goldman Sachs. Your line is open.

[Terence Flynn:]

Hi, thanks for taking the questions. Maybe first with respect to the 221 expansion cohorts, just wondering what the current plan is with respect to reporting data? Will it be a number of interim presentations along the way, or are you guys going to report all four cohorts at the same time? And then is that likely a second half 2015 on timing is that reasonable and then I have a follow-up thanks.

[David Schenkein:]

Thanks, Terence. So at this point I think it’s probably just a little bit too early to give guidance on how we will do that. In terms of reporting as you know our general approach is only to present data at a medical meeting when we have an appropriate amount of data to warrant presentation at a peer-reviewed meeting. So at this point, it’s still al little bit too early to know exactly how and when we will present the data from the expansion cohorts which are going fine. I would say, but not at this time.

[Terence Flynn:]

Okay. And then just with respect to the 348 Phase II trial, is the gating step meeting with regulators to nail down the trial design, or is there anything else you guys are waiting on? And then can you remind us of how much chronic tox data you currently have for that drug? Thank you.

[David Schenkein:]

So as we said at the R&D day, we are designing that trial on obviously working closely with the regulators to make sure that we have an appropriate design. Chris and his team are doing that now. And it’s a matter of doing that along with all of the normal factors to get a trial up and running. So nothing unusual or waiting or gating events. And I don't think we are ready to disclose exactly where we are with the chronic tox studies. But I do believe that we have everything we need to be able to those patients appropriately. And we obviously have some data from both the MAD study and the tox studies that we had done previously.

[Terence Flynn:]

Okay, thank you.

[Operator:]

Thank you. Our next question comes from the line of Yaron Werber of Citi. Your line is open.

[Yaron Werber:]

Hi, great, and thanks for taking my question, and congrats on the progress. So I have a quick question David for you, I don't know if you could give us a sense. I mean, the data so far has looked pretty good, where with that – with 221 patients respond fairly quickly. At the lower doses, it took a little bit longer, but at the higher doses, you get responses fairly quickly, and they seem pretty durable. So what do you know so far about, I’m trying to get a sense of what can drive resistance to the compound? And I’m trying to sort of understand, in animals can you give us a sense, and I know in humans there has not been a very sort of durable experience so far. You’ve mentioned it’s about four and a half months. But I’m trying to get a sense of how durable you think the responses could be? Thank you.

[David Schenkein:]

Yes, thanks, Yaron. Great question, again we don’t really have an answer there, as you know, and we mentioned this on our R&D day as well. If we look at the clinical data, obviously all we can speak to is the data that was presented at EHA, because the abstract doesn’t have any more details in it, we can only stick to that. And at EHA we had no patients who progressed on therapy. So clinical resistance at least at that date of time, it has not emerged. We are looking carefully with that. And pre-clinically, Scott and his team have looked carefully as well, and no obvious mechanism of resistance has been uncovered. We are continuing to look at it both pre-clinically and we will look at a clinically. We think it is a really important topic. We are very obviously, very pleased with the duration of responses we’ve seen to date. We will update that more at ASH. But there is no obvious clinical resistances mechanism that has been identified, but we are working really hard to look for that, we think that’s an important topic.

[Yaron Werber:]

Okay. And then just a question on 120. So the mutation is obviously very different, IDH1 versus IDH2. Could you give us a little bit of sense sort of are the patient populations completely distinct? I mean, obviously, the answer is yes. So just kind of strategically, how are you going to target one versus the other?

[David Schenkein:]

Yes. So I think as you know and you correctly stated that the overwhelming majority of patients, who carry an IDH mutation either have IDH1 or IDH2. There are few case reports, rare case reports of patients who have both. So these are two very different molecules, different scaffolds, and they are at this point to development paths. They do have overlapping diseases in the sense that we have obviously AML trials and solid tumor trials with both molecules, but we view them right now as two distinct programs and development plans. Does that answer your question?

[Yaron Werber:]

Yes, great. Thank you.

[David Schenkein:]

Okay.

[Operator:]

(Operator Instructions) Our next question comes from the line of Eric Schmidt of Cowen and Company. Your line is open.

[Eric Schmidt:]

Thanks for taking my questions. First on the PKD program. It sounds like you’re making good progress enrolling the natural history study. Can you tell us when we might see some data from that trial? And also remind us whether you’re actually collecting patient blood samples for molecular analyses like 2, 3-DPG and ATP, and things like that?

[David Schenkein:]

So on the – first one on the – I think at our R&D day, we did say that we hope to have data first data look on the natural history study in 2015. Obviously, that study is being run by investigators at children's hospital, but we’re working closely with them and are supporting that. And I don’t think we’ve given out any detail yet Eric on what kind of data we’re collecting from samples et cetera from those patients. But I would say that it’s a pretty robust natural history study and will give us a lot of information to help us really better understand the disease and potentially with the development of our molecule.

[Eric Schmidt:]

Okay. And just a quick one for Glenn. So moving parts in the Celgene collaboration accounting, with the amendment change, and then also the receivables you have. Could you give us any guidance for kind of what’s the normalized run rate of revenue recognition in future quarters?

[Glenn Goddard:]

Hi, Eric. It is the one thing that will be different going forward, under the old accounting guidance we were following very much almost like a straight line ratable method of recognition revenue, which was very predictable. I think under this new model, the revenue has the potential to be a big Spike year over time. I think as I mentioned as we deliver on some of our undelivered items, one of the larger ones probably being the ex-U.S. for 120. You will see some bumps in the revenue as we move forward. And at this point, we’re not giving specific guidance on quarterly revenue with going forward.

[Eric Schmidt:]

And would you expect to essentially stop incurring costs for 221 when the current Phase I is over, or are you going to incur all of the expansion cohort costs? Or how much longer are you going to be spending on your P&L for that? And I know you get reimbursed.

[David Schenkein:]

Well, I think moving forward, so we’re working closely with Celgene to make sure we’re aligned on the development plan that can go with 221 as fast as possible. And we're going to be involved all along the way. So I think for the next period of time, you should expect us to be very actively involved in the 221 development, and to be seeing reimbursement is coming in from that program.

[Eric Schmidt:]

Okay. Thanks a lot.

[Operator:]

And I'm showing no further questions in the queue. I’d like to turn the call back to David for closing remarks.

[David Schenkein:]

Thank you. So first of all, I want to thank everybody for joining us today for your continued interest and support. I want to also thank all of our investigators for their tremendous work on our clinical trials and of course most importantly thank patients who have participated in our early stage clinical trials, without them, we couldn’t move any of these molecules forward. So we appreciate their support. So with that, I hope everybody has a nice day and look forward to seeing you either in Barcelona or in San Francisco at ASH. Thanks a lot.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.