Agios Pharmaceuticals, Inc. (AGIO) Earnings Call Transcript & Summary

Welcome, everybody, to the 39th Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by Tessa Romero and Matt Bannon from the team. The next presenting company, we have is Agios. And speaking on behalf of the company, we have CEO, Jackie Fouse. Before I turn it over to Jackie, just wanted to highlight to the listeners on the webcast that you can submit a question by the ask-a-question feature in the portal, and I'm happy to ask those questions on your behalf. Jackie?

Thanks, Anupam. Hi, everybody. Thank you for joining us for our Agios presentation at the conference today. So back on December 21, we announced a 2-part change in our strategy, and it is something I'll cover with you today. We're very excited about where we're going at Agios and where we are with respect to leveraging the strengths that we've built up over our 12-year history as a company and reimagining how we take the company forward in the future. On Slide 2, we have some important information for investors related to the proxy statement that will come out to support our transaction to divest our oncology assets with Servier. On Slide 3, we have our forward-looking statements. On Slide 4, here, I would like to highlight something that for us has always been the case, and it always will be the case, no matter our strategic focus at Agios and that is our sense of urgency to help patients. Over the course of our history, we have brought IDH inhibitors to cancer patients, both in liquid as well as solid tumors, and we're very proud of that legacy. We have other drugs in other mechanisms being studied for indications in cancer. And now with our strategic pivot to focus on genetically defined diseases, we look forward to bringing transformative treatments to patients across a range of hemolytic anemias and potentially other indications in the genetically defined disease space in our futures. Patients have always been at the heart of everything that we do, and they will continue to be at the heart of everything that we do in the future. Why are we undertaking this strategic transformation for Agios now? Well, we wanted to do that from a position of strength. And we also see with our business that we are at an inflection point at this moment in time. The path that we have chosen to take forward is shaped by 3 important decisions that we've made. As we looked at our business and undertook a strategic review of where we are, we saw tremendous opportunity and optionality across all of our programs, both in oncology as well outside of oncology and genetically defined diseases. And we see today even more potential to reach more patients with a relatively greater differentiated profile by focusing our path forward with a singular concentration on genetically defined diseases. After we made that decision, we also went through a process to figure out what's the best way to maximize the value that our oncology programs can have for patients as well as our stakeholders. And I'll talk a little bit more about our decision in just a moment to divest our oncology platform and business to Servier Pharmaceuticals. All of this was done with a view to thinking through very thoughtfully, how to pursue capital markets independence and right size our company for the stage that we are today as we go forward with a focus on genetically defined diseases. And we think that the combination of that focus and the transaction that we are undertaking with Servier will allow us to do that and move quickly with the top priority on genetically defined diseases. In terms of how things have evolved over the course of 2020, we've seen a significant evolution of the data in support of our lead program for genetically defined diseases, mitapivat, AG-348 across a range of hemolytic anemias. And we have other drugs coming along in PKR and PK activation. We've also seen a really nice progression of our science and our research pipeline and other mechanisms and creating a variety of opportunities for us in genetically defined diseases. And this just gives us a clear path to success with a drug in mitapivat that we think across a range of hemolytic anemia indications can be a blockbuster status, revenue-generating drug. By selling our oncology portfolio to a very capable and committed buyer who is prioritizing oncology and has a global infrastructure, we believe that we're maximizing the impact that our oncology programs can have for patients and we really like the financial outcome of the transaction that we negotiated on behalf of our shareholders as well. So we think that this 2-part strategy sets us up very well for tremendous future success. I think it's important, and I'm on Slide 7 now to recognize that we are trying to combine the best of the areas that we think create the most differentiation for Agios as would take our company forward into the future. Cellular metabolism has always been at the center of what we have done in our heritage and with our scientific platform, we believe that we have tremendous differentiation in our science of cellular metabolism, in our insights there over the 12 years of our history. And we've always been, to some extent, focused on genetically defined diseases. So we're keeping those 2 elements of our core competencies and putting them together with that singular focus on genetically defined diseases outside of cancer, and we think it's making for a very compelling story on a go-forward basis with respect to what we're able to do for patients and our stockholders. On Slide 8, the transformative deal that we've announced with Servier supports our near term priorities in genetically defined diseases, which include initiating pivotal clinical programs in for mitapivat in both thalassemia and sickle cell disease in 2021. We will also be filing an NDA for mitapivat and pyruvate kinase deficiency and preparing for launch of that drug in 2022. The NDA will be filed this year in the first half of this year. And we'll be looking at the data from our healthy volunteer study for our next-generation PKR activator, AG-946, and determining next steps for clinical development for that drug. And we also look forward over the course of the year to giving you more information about our next research program to move towards IND. The transaction with Servier sets us up to deliver and execute very well over the next couple of years, and it sets us up to move towards our 2025 and beyond vision where we have adapted this somewhat compared to a year ago based on our decision to divest our oncology assets, but we expect to have mitapivat approvals in 3 hemolytic anemia indications by 2025. Again, we expect mitapivat to be a drug that can reach blockbuster revenue potential. And in 2025, we expect to have a broad clinical pipeline of at least 5 molecules in at least 10 indications in genetically defined diseases as well as a sustainable, robust research pipeline that can deliver an IND every 12 to 24 months. We also expect to be cash flow positive on an annual basis in 2025, something that we expected in our original 2025 vision that we put forth at this conference last year. With respect to the Servier transaction on Slide 10, I want to emphasize that this was step 2. After the first step where we came to the strategic decision to focus on genetically defined diseases in the future. After we took that first decision, then the second part of the decision-making process was to explore our options with respect to our oncology assets, and that's where we ran a broad competitive process and ended up negotiating the deal with Servier that we announced on December 21 to divest our oncology platform. There are a number of elements of the transaction, including cash consideration of up to $2 billion, of which $1.8 billion is upfront, $200 million of milestone payments possible upon FDA approval of vorasidenib, our pan-IDH brain-penetrant inhibitor, which is in a Phase III trial for glioma. And then we also will receive 5% of royalties on U.S. net sales of TIBSOVO as from -- after the transaction is closed. And 15% of royalties on U.S. net sales of vorasidenib upon its first commercial sale. This gives us the resources, combined with cash that we have in our hands today to be capital markets independent until we are cash flow positive in 2025 and return at least $1.2 billion of that $1.8 billion upfront cash to our shareholders through share buybacks. We think that this puts us, this is on Slide 12, now in a position of being able to deliver tremendous value for patients in the future as well as for our shareholders as we go forward, with focus on genetically defined diseases, where, we believe, that we can have the most differentiated profile for Agios, and through a financial transaction with Servier that we believe allows us to capture the full intrinsic value of our oncology assets today and move forward with capital markets independence and create tremendous value creation potential for our shareholders in the future. On Slide 13, without going into all the details here. This 2-part decision has been driven by a desire for us to maximize the potential that we have with our science to deliver great outcomes for patients. We also believe this is the right decision for all of our employees, given that we're putting our oncology assets in the hands of a very capable buyer, who is also taking our employees into their company, and we think it's very compelling for our shareholders. We're excited about where we're going as we're reimagining our future at Agios. On Slide 15, what we highlight here are some of the things that have made us the special company that we are today, culturally, scientifically, all of the things that we want to keep that we've built up over our track record over the last 12 years. So we're keeping all of those key things that make Agios and we're going to leverage those capabilities with a singular focus on genetically defined diseases. With that, we think that we will have an even greater ability to differentiate ourselves by delivering our science to patients with truly transformative therapies. And we can move very quickly to invest fully behind all the opportunities that we see in our pipeline and genetically defined diseases with strong execution and with the transaction with Servier, we have the financial resources to do that, still return funds to our shareholders. And in our new genetically defined disease focused model, our first drug to market, mitapivat has the potential to be a blockbuster drug out of the gate and allow us to generate more resources in the future to continue highly sustainable business model on a go-forward basis. On Slide 16, we highlight some data from that we've generated for the last 6 years in the clinic. We are the pioneering leaders in PKR activation. And we have been in the clinic with mitapivat and other molecules for over 6 years. You can see some of the data on the slide that we've generated regarding PKR activation. We've also delivered a lot of first, both with respect to how we're supporting patients in -- across a range of hemolytic anemias as well as the treating physician community, and you can see some of those first that we've delivered on this slide. We're very proud of the fact that we're on the brink of having the first disease-modifying therapy being brought to patients for pyruvate kinase deficiency. We're also the first company to generate clinical data for alpha thalassemia patients. So we've been pioneering here. We will continue to do so. We have a strong track record in this regard. On Slide 17, this is our clinical pipeline for mitapivat. You can see the depth and breadth of the clinical strategy behind mitapivat. Here, we announced positive results from our ACTIVATE non-transfusion-dependent pyruvate kinase deficiency trial back in November, and we look forward to the readout of ACTIVATE-T, the transfusion-dependent PKD population in the first quarter soon. So keep on lookout for that. We have disclosed now the details of our pivotal plan for thalassemia, and we will initiate that program this year, and we look forward to disclosing the details of our pivotal plan for clinical development of sickle cell disease for mitapivat and initiating that program later this year as well. And you can see some of the other trials here related to the pediatric plans. As well as on the right side of the slide, the patient range numbers for these different indications where we'll enter in the rare disease space for mitapivat with PKD and then expand that label over time into patient populations that will take us into a greater and greater number of patients reach. So we're very excited about mitapivat and its potential. We have a lot of catalysts coming for the drug in the near term and over time as well. But we're about more than mitapivat. So on Slide 18, what we highlight here are the significant opportunities that we see beyond our initial pipeline focus on mitapivat as well as AG-946, the next-generation PKR activator. And I'll walk through each of these elements in just a moment. On the right side of this slide, you can see the indications that we currently have clinical data and programs for PKD, sickle cell disease, alpha and beta thalassemia. And then you see a whole host of additional indications that we see as having potential for our genetically defined disease pipeline, both our clinical-stage assets as well programs that we have in the research area, and it goes well beyond PKR into other PK activation mechanisms as well as other mechanisms, including PAH and BCAT-II. With respect to PKR activation and mitapivat and 946, as those drugs lean toward that in -- of the PK activation spectrum, I've talked about mitapivat already. And in this year, we look forward to presenting data from our healthy volunteer study for AG-946 and then talking more with you about future development plans for that molecule. We've also got other candidates moving along and other work that we're doing with our research team on PK activation, including PKM2. And we have research efforts underway announced how we are thinking about those indications for clinical development as well as our ongoing research work, and we have decisions that we will make about of pursuing developmental opportunities over the course of 2021, and we look forward with sharing those more with you. Some of these could take us into therapeutic categories where we would partner for those areas if they're not in our area of expertise, but we see a tremendous opportunity here. And for some of these potential indications, we've included some patient numbers for you on Slide 20. So you can have an appreciation of what the opportunity may look like for us there. We're also quite excited about non-PK activation opportunities that have come out of our scientific research platform. We now have a development candidate that we have declared in the PAH mechanism with an indication potential in phenylketonuria. You can see the number of patients in the U.S. on Slide 21. And so we are pursuing work now for IND enabling activities, and we'll have more updates for you in that regard over the course of 2021. And we also are doing lead optimization work in another mechanism of BCAT-II, where we look forward to sharing more about that with you as well, and you can see some of the potential indications on the right side of Slide 21 in aminoacidurias and acidemia there for that mechanism. So we've made a ton of progress over the last few years with our science group, and we're extremely proud of everything that they've done as well as our oncology work as well. But it's this opportunity that you see here that is propelling us to focus on genetically defined diseases on a go-forward basis. On Slide 22, the takeaway that I want you to have here for those of you who are following along on the slides. These are our anticipated 2021 key milestones. We've grouped them in terms of program milestones, largely around clinical execution and regulatory activities and getting ready for launches. And then data presentations, our corporate objective clearly of closing on the Servier transaction in Q2 and starting that return of capital to shareholders. And then we've highlighted some of our other more commercial milestones and things related to our oncology programs, which we continue to move forward until we close the transaction with Servier. I'm not going to go into every detail on everything that's on this slide, but I hope that you see a lot of exciting catalyst coming in 2021, and then we'll have even more beyond this. But we're very excited about where we're going. We're excited about where we can be with our vision in 2025, which is recapture on Slide 23 and we're super energized and hope that you will be excited about where we're going with our reimagined Agios as well. So with that, thank you very much. We're going to open it up for Q&A with Anupam and Tessa. And I'm also inviting my colleagues, Chris Bowden, our Chief Medical Officer; Bruce Car, our Chief Scientific Officer; Darrin Miles, our Head of Commercial; and Jonathan Biller, our Chief Financial Officer and Head of Legal and Corporate Affairs to join me for the Q&A. Thank you very much.

Great. Well, I just want to remind everybody on the webcast that if you want to submit a question, please submit it through the ask-a-question feature in the portal, and I'm happy to ask on your behalf. The first one actually comes from the portal, which is for sickle cell disease, do you think hemoglobin is an acceptable Phase III primary endpoint?

Chris?

Hi, everybody. Well, an increase in hemoglobin of a gram has been used to garner an accelerated approval for 1 drug, voxelotor. And so in that context, certainly, it is -- has precedent with FDA, and we'll see where EMA comes down, although I think some of the communications would suggest that they'll be open to it as well. And so then I think the big question is, what do you need to get full approval and what other things are there? And in the setting of sickle cell disease, there are a number of issues associated with the chronic hemolytic anemia from a disease burden. And then, of course, you're all familiar with the disease burden aspect of pain crisis, vaso-occlusive crisis, acute chest syndrome. So I think that in order to garner -- we think that in order to garner full approval that there needs to be something more than just hemoglobin and just hemoglobin increase, which is important. And obviously, the fact that voxelotor has an accelerated approval means that that's seen as an acceptable surrogate. This is a similar situation for us as we've talked about pyruvate kinase deficiency, where in chronic hemolytic anemia is increasing hemoglobin is important, but we think that the more evidence you can bring to bear both from a mechanism of action and other supportive endpoints, whether it's improvements in hemolytic markers, demonstration that you're addressing an effective erythropoiesis, improvements in patient-reported outcomes, which means when they take the drug and these things improve, then we're just talking about, they actually feel better. And then uniquely for sickle cell, it's the -- can you demonstrate a reduction in the occurrence of pain crisis? So those are -- that's a challenge on one hand. But on the other hand, it gives you a number of different ways to approach your development program and how you set your trial up. It's not going to just be the primary end point or even if you go with co-primary endpoints, it's going to be the totality of data beyond that increase in hemoglobin will be important in sickle cell disease.

And what are the final steps of designing the sickle cell trial here as the next step? What are the gating factors to completing that?

Well, we've had our interactions with the authorities. We've gotten our feedback from them in terms of how they're thinking about this. And some of my comments allude to some of the input we've received. And then on employment, it starts to dial down into what are the challenges we know that are going to be associated with launching a trial. At this time, you've got 2 new drugs approved with voxelotor and crizanlizumab. You've got new drugs coming in, so there's a lot of change happening that you know is going to happen that you can't predict some of the outcomes. So that means you have to take some decisions based on the best judgments that on how those things are going to evolve and what we see in our data and what we expect from it. The other piece that's really -- so there's just -- there's some decisions now that we're working through. Since we went to launch trials our pivotal programs this year. And then the other aspect is the operational part. So we're going global and bringing sites in, completing feasibility, understanding how many patients they have based on some of the various eligibility criteria that we're putting forward. So wrapping all that up is where we're moving now. And I think the key part of your question is you've got to make some decisions and put your nickel down. And you always wish you had more information, but you've got to ask yourself, how long is it going to take me to get that additional information and is it worth it? And two, is that really does the amount of information that I can get in that period of time give me how much more confidence does it get. And so at this point, we think we have everything we need to make those decisions. And now we did the hard part of making them finalizing them and moving them forward to the time line we've committed to.

We've got a question from the portal here, which is sickle cell is a prevalent disease in the sort of Middle East type of region. How are you thinking about sort of commercialization and trial enrollment in that region, specifically?

I can probably address the overarching question around commercialization, and Chris can tackle trial enrollment. So yes, we recognize that the incidence of sickle cell globally is quite significant. And it's an opportunity and a need that we want to be able to address with mitapivat. What's key though is that we don't think we necessarily need to do it ourselves, right? So our focus would be on striking partnerships with either global or regional players with a footprint in those geographies that can -- that we'll partner with in order to bring mitapivat to the market. So it gives us great -- a good deal of optionality, not necessarily efficient for Agios to undertake that on our own. With regard to clinical trial enrollment, I'll turn it to Chris.

We agree very much with the questioner that, that's an important part of the world where sickle cell disease is prevalent and is indeed a high unmet need and are already taking steps to do some of that operational work that I alluded to in my first answer as well as in other important parts of the world.

I'm going to hand it over to Tessa from the team to ask a quick question on 946.

Yes. Thanks, Anupam. So I think you guys noted that we should be seeing some healthy volunteer data from the 946 program by year-end. I think that you all are incorporating a sickle cell disease cohort in that study. So just can you remind us of when that's initiated -- when it could be initiated and potential time lines to data on sickle cell for that program?

Yes. So we have our trial with AG-946 is ongoing in healthy volunteers. And that's a pretty standard, single-ascending dose series of cohorts and multi-ascending dose series of cohorts. And we have the option to open a sickle cell cohort once we have defined a go-forward dose. And so we are not able to guide as to when exactly that will happen because we have -- when we get to that -- when we reach that point, then we'll be able to declare, okay, we have what we need, and let's move forward. Now -- and the things that we want to incorporate into that would be, how is the drug tolerated over a 14-day dosing period. And how does the safety because we'll study several dose cohorts. Also look when we look at pharmacokinetics, pharmacodynamics data. And so then we'll pull all that together and then we, of course, are hopeful that 946 will clear its hurdles and then we'll be able to make that decision to activate that sickle cell cohort. There is another component about 946 that you should think about that Jackie alluded to, which is the expansion that the potential that we can study AG-946 and some of these other diseases that we're very keen on looking at when we're thinking about activating PKM2 as well as other diseases where we can activate PKR. So I think we've guided to the sickle cell cohort. It is -- it would certainly be something of interest to us, but we have potentially a broader view -- we will have a broader view of 946 if it achieves its potential in the SAD/MAD cohort.

We've got another question from the portal, actually. What are Servier's plans with the broader oncology pipeline? Will they continue to advance AG-270 focused on MAT2A and MTAP deletions?

So without speaking on their behalf, what I can tell you is that we've been very pleased with the relationship that we formed with Servier and with the transaction that we negotiated because not only because we think it creates great value for us and our shareholders and enables our strategic pivot, but also because we feel like we're putting our oncology assets into the hands of a company that has the financial means to invest behind the programs. They are very committed. If you look at what they've said publicly to oncology as a priority therapeutic area for them as well as the U.S. market. And our understanding is that they are looking across all of the assets. They wanted to take our entire oncology platform, all of the programs both clinical research and the people because they see potential there, and our understanding is they are going to continue to explore options and invest behind the assets. So I think the short answer is they will continue to invest behind AG-270 and MAT2A inhibition more generally, but it's going to be up to them exactly how they take that forward.

We've got another question from the portal. Post the close of the Servier transaction in 2Q, how should we think about time lines to the return of capital to shareholders, and I guess, the form in which this will take, I'm assuming it's buyback, right?

Yes, sure. I can take that one. So what we've discussed so far is we'll return the capital in the form of share repurchases. We'll commence those share repurchases after closing. As we get closer to closing, we'll provide more information with respect to exactly how we'll execute them. As you know there's certainly different ways you can execute those share repurchases. I think the way that we would suggest you think about the timing of the return is that we would imagine our plan on completing the $1.2 billion of share repurchases within a 12- to 18-month period. But in terms of how much they might be front-loaded versus, for example, ratable, we'll provide more guidance as we get closer to closing.

We've got another question from the portal, which is, how do you think about your sickle cell program in the treatment paradigm with the advent of potential gene therapy within the disease?

Darrin, do you want to?

I'd like to take an initial pass and then maybe pass it to Chris and Bruce to share further. So obviously, we -- in developing the program, we do quite a significant deep dive into the market an assessment of existing and potential competition we engage with the KOL and broader treating community to get a sense for how their behaviors may change as these new products are introduced over time. And there's a good deal of excitement, there should be around gene therapy. I think, however, there are some limitations, though, right, to the eligible patient population just due to the procedures required in order to ultimately be able to administer it successfully. So in our estimation, actually, across all settings, where we expect to see -- or can expect to see gene therapy introduce, the market is telling us, and we've been able to confirm multiple times now that they're seeing it limited more to 10% to 15% of the diagnosed population, which leaves the vast majority of patients available for the other interventions. And so Chris, maybe you can comment about some of your observations.

At some time in the future, when gene editing is not associated with conditioning and the preparative regimen and the fitness that one must have in order to go with that, then it may be an option for many, many more patients. For now, Darrin, I think, has framed where we are for now and for what I think is going to be the foreseeable future, understanding that innovations come out of nowhere. And what we've heard from patients is that -- and physicians is there's a very high need for therapies like PK -- active PKR activators that are oral medicines that can be taken regularly and can address the components that -- of their disease that affect them. And people are very -- that we've patients and advocates that we've spoken to are very realistic about this in the sense that this is not a cure, but they are things that they're looking to have addressed are fatigue and pain. And so that's where we think is fit. Another nuance I would put is that you have 2 drugs that have come on to market now that either raise your hemoglobin or reduce VOCs. And we're talking that the potential, we think, for mitapivat is to address most of those. We also see another upside for mitapivat, which we've demonstrated across a number of diseases now where we've reduced hemolysis and improved hematopoiesis. By reducing hemolysis, you can reduce the -- to some extent, the inflammatory state that goes with that constant destruction of red cells. And so we think also that, that has the potential to translate into patient-reported outcomes, improvements in how you feels when you're on the drug which gets back to one of a series of the earlier questions is, how are you designing your trials and what else do you need besides an increase in hemoglobin. There's just a lot of room there. I think that gene therapy, the results are really impressive. I'm really, really happy to see that. It's just an impressive feat of science and the clinical data looks great. But we get in these situations frequently, and I'm not saying that questionnaire is putting this forward. But we don't see -- we saw the same thing with IDH and leukemia. We see that new therapies coming in tends to lift all boats. And the other aspect is patients with sickle cells see this that we hope that, that will also compel them to enter into trials and that may help us accrue our studies, everybody's studies.

Maybe last question really quickly, just came into the portal here. In sickle cell disease, what is biologically driving the preconditioning requirements for the gene therapies? And how might that change? And how do you think about -- I think you kind of mentioned this the preconditioning in the context of your therapy, right, which obviously don't need?

Well, I'll leave the details of given the limited time of the needs for preconditioning and how that may change over time to companies that forget more about this in a day, then I'll probably know in the next several months to years. For us, we're looking at a small molecule that activates pyruvate kinase, which is a fundamental key enzyme in terms of maintaining the health of the red cell. And by -- Bruce Car has made a very nice analogy for us where that enzyme may be working fine, it's wild type, it's not mutated, but it's not able to meet the needs of the cell, which is under stress because of sickle cell disease. So that's what we're looking to do. And you don't need to go through a number of highly innovative, yet complicated aspects of gene editing replacing genes. We're activating and improving the performance of an enzyme that is already present in the red cell.

If I could maybe just add 1 thing to Chris' point, it's not a zero-sum game, right? So not at all patients are responding to all treatments, right? You're seeing response rates 40%, 50% or thereabout. There's an opportunity for patients to step through a number of treatments before they get to gene therapy. I would tell -- I would direct you to publication I think from last September around recommended treatment approaches in the setting of the availability of PKR activators as well as potentially gene therapy. And sort of given the requirements both physical as well as the chemo conditioning requirements for gene therapy. They would actually advise potentially stepping through oral treatment before offering patients gene therapy. I suspect that gives us some sense of how things could potentially play out in sickle cell as well. But again, I think we welcome innovations for these patients across the board. It's a good thing.

Okay. Jackie and team, Chris, Jonathan, Bruce, Darrin, want to thank you guys for taking the time. And I hope you guys have a great rest of the meeting, and thanks to all the listeners on the webcast.

Yes. Thanks, everybody. Thanks, Anupam. Thanks, Tessa. Thanks, audience.