CAMBRIDGE, Mass. – Agios Pharmaceuticals, Inc. (NASDAQ:AGIO), a company specializing in cellular metabolism to treat rare diseases, has entered into an agreement to sell its royalty rights on potential U.S. sales of the cancer drug vorasidenib to Royalty Pharma. The transaction is set to provide Agios with an upfront payment of $905 million upon U.S. Food and Drug Administration (FDA) approval of the drug, which is expected by the Prescription Drug User Fee Act (PDUFA) action date of August 20, 2024.

Vorasidenib is an investigational therapy for the treatment of IDH-mutant diffuse glioma, a form of brain cancer. It functions by inhibiting mutated forms of the enzymes isocitrate dehydrogenase 1 and 2 (IDH1/2), which are involved in cancer cell metabolism.

Under the terms of the deal, Royalty Pharma will acquire the full 15% royalty on annual net sales of vorasidenib in the U.S. up to $1 billion. If annual sales exceed this threshold, Agios will retain a 3% royalty, while Royalty Pharma’s royalty will be reduced to 12%.

Agios retains rights to a separate $200 million milestone payment from Servier, a global pharmaceutical company, upon FDA approval of vorasidenib. This payment is part of a previous agreement from the sale of Agios’s oncology portfolio to Servier in 2021.

Brian Goff, CEO of Agios, expressed that the deal with Royalty Pharma adds significant financial flexibility for the company and allows them to focus on preparing for potential launches of their drug PYRUKYND® (mitapivat) for thalassemia and sickle cell disease, as well as to potentially expand their pipeline.

The financial advice for the transaction was provided by Goldman Sachs & Co. LLC, and legal counsel was provided by WilmerHale.

InvestingPro Insights

Agios Pharmaceuticals has been making strategic financial moves, as evidenced by the recent agreement to sell royalty rights for vorasidenib, potentially bolstering their cash reserves upon FDA approval. This financial acumen is reflected in the company’s balance sheet, which, according to an InvestingPro Tip, holds more cash than debt. This liquidity is crucial for Agios as it prepares for the commercial launch of other drugs in its pipeline.

The company’s financial health is further underscored by its ability to meet short-term obligations, with liquid assets surpassing these liabilities. This is a reassuring sign for investors, especially considering that Agios is navigating through a period of significant cash burn, a challenge common in the biotech industry where research and development costs can be substantial.

InvestingPro Data reveals a mixed picture: Agios has a market cap of $1.79 billion and has experienced a notable 54.61% revenue growth over the last twelve months as of Q1 2024. This growth is indicative of the company’s potential, despite its current negative gross profit margin of -919.62% over the same period, which highlights the high costs associated with its groundbreaking research.

Investors interested in a deeper dive into Agios Pharmaceuticals can gain further insights with additional InvestingPro Tips available at https://www.investing.com/pro/AGIO. There are currently 9 additional tips listed, offering a comprehensive analysis of the company’s financial health and market performance. For those looking to subscribe to InvestingPro for a more detailed perspective, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

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