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

Good morning. And thanks so much for joining us on day 2 of Oppenheimer's 31st Annual Healthcare Conference. My name is Mark Breidenbach. I'm part of the Oppenheimer's biotech equity research team. And this morning, I'm pleased to be hosting a fireside chat with Agios, which is developing novel therapies for rare diseases. We're joined today by the company's CEO, Jackie Fouse. And we might be joined in a little bit by CMO, Chris Bowden. We'll be sure to leave a few minutes at the end for Q&A. So I would encourage anyone in the audience who has a question to make use of the question box at the bottom of the -- of your video. So thanks everyone for joining in today. And let's go ahead and get started.

Jackie, I think it's fair to say, Agios stands out as one of the biggest pivot stories in biotech in recent memory. Can you introduce the company in the context of the transition it's currently going through? And make sure everyone is up to speed on sort of what the company started as, what its core strengths are, and where it's likely heading in the relatively near-term future?

Great. Thanks for having us, Mark, and thanks, everybody, for joining the session this morning. So it's a fascinating story, and I think that not only because I'm the CEO of Agios but the whole history of the company. So the company was founded in 2008 by 4 scientists, clinicians. And the basic premise was that the science of cellular metabolism should be able to significantly benefit patients, mostly with targeted therapies. And at the beginning, the company had a white sheet of paper and a little bit of VC funding in 2008, and no particular bias for oncology or non-oncology. The founders had some ideas and that got things started. So back in 2009 or 2010, I think the first Nature article was published related to IDH inhibition, and that's where the company had the breakthrough in the first elucidation of the potential role for IDH, and then IDH inhibitors in the treatment of IDH-mutant cancers. And with that, things were off and running. The company struck a deal with Celgene, which at the time in 2010 was one of those biotech partnerships that was kind of early in that wave of partnerships and got some attention. And so then the company was off to the races and a lot of focus on IDH inhibition, which culminated in the successful bringing to market of IDHIFA for IDH2-mutant AML and TIBSOVO for IDH1-mutant AML and a drug that's in Phase III trials now for low-grade glioma along the way. So all from the basic scientific platform in cellular metabolism. And along the way, over the last maybe 6 or 7 years, the company studied PK, in fact, probably earlier than that, but the focus was on IDH for a while. But we're studying PK activation as well, and then honed in on PKR activation within that. But we've also done some work on PKM2, which we'll hear more about as time goes on. And so we've been looking at that area outside of oncology for quite a number of years, have been in the clinic for almost 5 years now with our lead drug mitapivat. And -- so what we saw over the course of time is also significant changes in the landscape for oncology with checkpoint inhibitors and immuno-oncology therapies, cell therapies, all those sorts of things. And our products in oncology were serving these terrific niches, but we didn't have yet a product that was going to be sort of that breakout blockbuster top cancer product. And as things evolved over the course of the last few years, and we've seen that with mitapivat with a growing body of clinical data across 3 indications in nonmalignant hematology, we -- as we ran our long-range planning processes, which are really for decision making, it's more about that. And as a financial model, we saw this terrific emerging potential from all of our work in genetically defined diseases, which a rare genetic disease is a subset of that outside of cancer with the first wave being in these severe hemolytic anemias. We also saw with that evolution, an anchor product in mitapivat, where you could go into a rare disease and then expand the label indications over time. So we're going into pyruvate kinase deficiency and then thalassemia and then sickle cell disease to reach more and more patients as you ran through those programs and end up with a product that we think can be a blockbuster revenue generator. And that then gives you more resources to get to that cash flow positivity that puts you in capital markets, independence and things like that over time. So that's where we are today. We saw this inflection point in 2020 as we probably the last bit of that was the thalassemia Phase II data being very positive, the proof-of-concept achievement for sickle cell disease and the ongoing progress for mitapivat in pyruvate kinase deficiency, which we're now preparing the filing for, and Chris can speak about that. So as all of that evolved and the research pipeline, which we'll feature it at an R&D Day later this year, while we evaluated the oncology landscape, we came to the conclusion that for a company of our size and scale, focus would be better with the opportunity that we saw coming outside of cancer. And so we made the strategic decision to see if we could make this pivot to focus on genetically defined diseases. And then step 2 in the process was, well, we still have valuable oncology assets. Can we negotiate a deal for those that would allow us to realize appropriate value in line with what our view of the intrinsic value of those assets is? And that led to the negotiation of the deal with Servier. So it was seeing the opportunity, supported by data, decision to make the strategic pivot and then seeing what kind of transaction can you negotiate to enable all of that because we weren't going to just give our oncology products away. So with that, maybe that was kind of a long answer.

No. No. That's perfect. It's kind of sounds like a confluence of factors in -- really in 2020 led to the decision to take this course. And of course, the transaction with Servier comes with a very impressive cash upfront, the $1.8 billion in addition to milestones and royalties from future sales of TIBSOVO and vorasidenib. Kudos to you guys for negotiating a deal like that. What were the specific factors that you think led Servier to offer such a nice upfront? And maybe can you describe how you're reinvesting some of that back into Agios?

I think we were fortunate to -- on the timing of this to feel like we've got this terrific substance behind where we want to go with genetically defined diseases. And we were looking to divest our oncology assets at a moment where Servier is looking to build their presence in oncology and build their presence in the U.S. And some of you may know that they acquired some oncology assets, the oncology assets of Shire, a few years ago and started that process. And this alignment of our respective strategic interests just came together in a terrific way over the course of last year as we made our decisions, and then went out to canvas the landscape and see what the options for our oncology assets would be. So they also were very interested to take our oncology research capabilities and our people and keep those. So what we wanted to do with the assets, which was get them with a great home where they would be invested behind and optimized on behalf of patients and that good things will happen for our people and everything else aligned with their aspirations in oncology and in the U.S. So when they looked at it, interestingly, they saw the intrinsic value of those assets the same way that we see the intrinsic value of those assets, and the fit was terrific for them. So we're very happy with it. We consider them a very collaborative partner as we're making our way through this transition. And I think it was one of those unique moments in time where you'd have alignment of interests between 2 companies.

In the terms of reinvesting in the Agios?

So we -- as you rightly pointed out, we have $1.8 billion coming in upfront, and then we've got some milestones and royalties that will also come with the deal. As we look at where we are, what we need in terms of resources on a go-forward basis to take us to cash flow positivity, what we decided to do is take this opportunity to -- and I use the word reset, even though I'm not sure if it's the perfect word, but to return $1.2 billion of that to shareholders through the form of share buybacks, which I realize for a company of our size and in this space is somewhat unique, but we have raised a lot of money over time. We have certain platform and portfolio, and now by selling a large part of it, we think it's appropriate to give some of those funds back to shareholders. And we're going to keep what we need and have some flexibility around that, and we'll be able to stay independent of the equity markets. That's the plan until we reach cash flow positivity in around 2025, 2026. So we thought it was a win-win all the way around.

Yes, you're right. We don't see share buybacks very often for companies of your size. It's also -- it's a unique aspect of Agios' story. And of course, the sale of your oncology portfolio doesn't just involve products in a pipeline, but it's people, too. Do you think the departure of some or most of the oncology R&D staff is going to fundamentally change the culture and perhaps the innovative potential of Agios as a company?

I don't think so, but we need to be very attentive to that. There are softer aspects of the culture, and then there are some of the other aspects around the science and the pursuit of science and all of that, that are hopefully unique to us given our platform in cellular metabolism. So most of the people who we would consider more general scientists, irrespective of whether it's oncology or non-oncology, and the ones who have that deep history in cellular metabolism with us, those are -- they're staying. So the people that are going with the assets is the entire -- are the entire commercial team that supports oncology, and that's a discrete team compared to the genetically defined disease team. So that commercial team will go. We have people in clinical development, who are dedicated to the oncology programs in Chris' organization who will go. And then we have some researchers from our research and discovery group who will also go, if they were oncology-dedicated people. And then everyone else, who was not specifically dedicated to oncology, is staying with us. So we're keeping -- there's around 200 people that are going, a little less, maybe 190, and we have around 370 or so that stay with us at Agios. So we're keeping the core capabilities, and really the oncology-specific roles are going with the oncology assets, and we've emphasized our desire to focus that science of cellular metabolism on genetically defined diseases as we take things forward and how with the financial resources that we now have, we'll be able to really accelerate our efforts in that regard. When you're a company of our size, who's also dependent on the equity markets, and you're trying to invest across all of these programs in both oncology and non-oncology as the opportunities present themselves because we've been successful. We have so many opportunities. We sometimes are having to make these trade-off decisions based on financial constraints around where to really focus against the greatest opportunities. So I think the focus is actually going to help us continue to sustain that terrific innovation on a go-forward basis. That's the goal anyway.

Okay. Okay. So I guess this is kind of related to the previous question, but since the mitapivat has regulatory filings on the near-term horizon, at least, in pyruvate kinase deficiency, I'm curious to what extent the TIBSOVO-related commercial infrastructure can be repurposed or converted over to support mitapivat's launch? How much of what you already have in place can be kind of directly quoted over?

So what we had done along the way is we've started to build out the commercial infrastructure, and you start with things like marketing and the market access work and those things early on before you hire your field force. So we'd started that a few years ago. So the commercial capabilities were really pretty separate. You might imagine that there are certain things that you can leverage behind the scenes. So sales operations, for example, we will still have that, and you can leverage that. But they're pretty distinctive skill sets when you think about rare genetic diseases and then other genetically defined non-cancer diseases compared to oncology. So it's really going to be a lift in the commercial oncology group goes, and we will keep all those people that we had already hired over the last few years into the genetically defined disease commercial group, and now we'll be building that. So we'll rebuild the field force in advance of the PKD launch, which we expect in 2022. So we're in the process of building the field force now for the non-oncology group. And the -- given that the first indications for rare genetic diseases, we actually expect the size of that field force to be maybe 60% of the size of the oncology field force. So we're actually going to -- for 1 year or 2, have, in total, a relatively lower commercial expense, given the PKD launch comes first as compared to the expenses that are going with the oncology assets to Servier. So we kind of get this reset on the expense base as well that we've talked about a little bit.

Okay. Got it. So let's try and drag Chris into the conversation a little bit, if we can. So it sounds like a lot of the near-term future story for Agios is going to be centered around mitapivat. And this is a really remarkable class of -- PKR activators, I should say, are remarkable in the sense that they're active in a pretty broad, wide variety of hereditary anemias. You've shown activity not only in pyruvate kinase deficiency and thalassemias, but most recently, sickle cell anemia. So as it seems, Agios kind of went after the smallest market opportunity with PKD first before pursuing some of the larger indications. What made PKD so enticing as the initial development priority for mitapivat? You're muted, Chris.

The targeted nature and that the initial pharmacodynamics work we did, which a lot of it was ex vivo, and looking at red cells from patients with the disease suggested that we would have a large effect. And at the same time, when we studied the drug in volunteers, that's when we saw that we got a pretty good activation of the wild-type enzyme. So we've got the pyruvate kinase deficiency program underway, and I think that -- so we're seeing the fruits of that activity now. We didn't wait too long to start pursuing wild type, and I was just thinking through this. We published the first data last year at EHA. We talked about achieving proof-of-concept at the end of 2019, that means we ran the study effectively in the 2018-2019 time frame and rode it in the 2017 time frame. So we went after what we thought was the proof-of-concept in terms of a rare disease where there is no therapy that we could really establish the science in terms of activating the mutated form. And from the perspective of the wild type, that came second because we weren't sure that the magnitude of the effect was going to look like it does -- look like what we predicted it could be in pyruvate kinase deficiency. I think the other important thing relates to what Jackie was saying. If you think back a couple of years in that 2014 to 2016 time frame, we were ramping up as a company where we're going from a biotech start-up to suddenly, oh my God, it works in IDH1 and IDH2 AML, cholangiocarcinoma, and we're starting to put a story together in glioma. At the same time, the PKR story is coming along slightly behind. And so we were -- when I joined the company in 2014, we were 102. There were 8 people. And so there was just also the natural aspect of getting people in establishing critical mass and moving forward on what turned out to be multiple fronts. And here we are today now where we're realizing the scope of the opportunity, not just in terms of activating PKR but the potential to activate PKM, too, and expand what we're doing in PKR has compelled us to make the decision that Jackie was just speaking to.

And by the way, from a commercial standpoint, this is helpful because we go with PKD first, and then we have the label expansion, so we can support mitapivat with rare disease pricing, which we think will also hold for thalassemia. And then as we make our way through there and see the totality of the clinical data for sickle cell disease, we'll figure out at that point in time how we want to price the product as we move things along. But it's a nice way to have physician and patient experience with the product in PKD and then thalassemia, and then you get to sickle cell, and you've got some optionality around the prices, and you've got unmet medical need with PKD, and you build up a very nice body of support for the brand and what mitapivat can do across a broad range of hemolytic anemias. So it works pretty much all the way around.

Got it. So PKD, in particular, is such a heterogeneous disease, what do you think is reasonable in terms of a future product label? Do you see any risk that the FDA would want to keep the label narrowed to specific phenotypes or baseline symptom severity? Is there a Goldilocks Zone in the types of PKD patients who would likely benefit from this drug? And if so, how big of a population is that?

Well, you started from -- I'll talk about our position and how we frame this from a data perspective and how we think that can translate to clinical practice from our knowledge of the drug and how we're going to bring it forward, and then we'll engage with discussions with FDA, and then the outcome will determine the real answer to your question, Mark. But if you start from a genetic standpoint, DRIVE PK established -- DRIVE PK, I'd say, in the Natural History Study work that we've done established that approximately 80% to 85% of patients are eligible to be treated on the basis of having at least 1 missense mutation. So that's step 1. There are over 300 mutations. So we have argued to date in that, that rules out having a -- being able to develop a companion diagnostic. And given that the standard of care is, one standard of care is using a companion diagnostic, we don't see limitations there. We think we have a strong argument that, that's not practical. And then I'll talk on a few other aspects of how we will present that later. And then if you think about our 2 trials and transfusion -- regularly transfused, that -- it's pretty clear that -- around how I think regulatory agencies see that unmet need. The more challenging one, if you will, a nuanced one is in patients who are not regularly transfused. And here, we've gotten pretty consistent feedback over the years and this applies to thalassemia and sickle cell as well that you've got to show something more than just a moderate -- mild-to-moderate increase in hemoglobin. So what did we do? We increased the bar for the primary endpoint and activated to 1.5 grams per deciliter. Patients needed to have a moderate-to-severe anemia to get in, they had to have a hemoglobin less than 10. And so from there, we can now bring forward a data set that shows in a group of patients that's more likely to have symptoms associated with their disease or significant -- more significant symptoms than, say, individuals with mild disease. And then, of course, we've talked about the need to bring forward other supporting measures, reductions in hemolysis as well as any improvements in quality of life and patient-reported outcomes. So you pull all that together, and I think one of the other important aspects is that the time to response, if you look at DRIVE PK is relatively rapid. So we think we have a strong package to say, look, in a patient who has a missense mutation or even if you don't know because you can't get access to genetic testing, you can use the drug for several weeks, and by that time, you're going to understand if there's going to be a response or not and make your decisions from there. And that's a pragmatic approach. The tolerability of the drug where we feel very comfortable with now with 4-plus years of dosing, and we think that sets up to put a label forward, thus, for adults with pyruvate kinase deficiency, who are not regularly transfused. Will we see language that would say with moderate-to-severe anemia or hemoglobin less than 10? It's possible, but that's -- those are things -- those are important details that will come out as we submit the package. But we think the package and the drug and the disease allows us to go for a broad label and without the need for testing other than to have a definitive diagnosis of pyruvate kinase deficiency on the basis of either an enzyme test and/or genetic testing.

Yes. Just as a precedent, I guess, with Global Blood's pivotal study of Oxbryta, there was hypothetical concerns around similar labeling restrictions, depending on the degree of anemia, and those ended up not really materializing once the product was approved. I want to spend some time on pivotal development plans of mitapivat in sickle cell disease, specifically. You recently outlined your study design on the last quarterly call. And in some ways, the Phase II/III trial is reminiscent of Global Blood's HOPE trial. But in some -- otherwise, it's pretty different, given that we have 2 different primary endpoints in your trial. First of all, why do you believe hemoglobin response alone would be insufficient to pursue Subpart H accelerated approval strategy? I've tried to set a pretty clear precedent for doing this, not so long ago. So what's different in this case?

Yes. Well, we got pretty direct feedback, first of all. And the why is because they've provided an accelerated approval for a drug already. So -- and there's not a real unmet need that's being met given that Oxbryta is out there. This is consistent with what I was talking about in the previous section and answer to your question around pyruvate kinase deficiency. So what we're not saying -- what we're saying is that you can get an approval on an increase in hemoglobin plus some other things. So I want to be really clear when we say hemoglobin alone, that means we'd have a trial that's statistically positive. However, we're not able to show through other supporting measures that, that increase in hemoglobin has meaningful outcomes for patients in terms of reduction of hemolytic parameters, improvements in quality of life or patient-reported outcomes, trends or statistically significant decreases in pain crises or vaso-occlusive crises. So the trial we've designed has 2 potential opportunities to be positive from a clinical trial statistical positive perspective, and then whether it's a regulatory package will really depend on the totality of data. So we've designed a trial that we think tries to thread that needle in what is a very complicated disease, and we're excited about that.

Okay. So it sounds like you might have a window to show some other clinical benefit besides VOC to support approval. I'm just curious why you went with VOC instead of something like transfusion reduction in transfusion-dependent sickle cell patients? So something that we might have more data around or it seems like with mitapivat right now, we don't have a lot of information about its potential impact on annualized VOC rate. So I'm just trying to figure out why you went with the VOC as a co-primary endpoint?

Yes. Yes. The reason why we went with VOC is because the mechanism of the drug through that reduction of 2,3-DPG gives us reason to believe that could be the case. And that's how we have the largest impact in terms of our label and the biggest impact on patient outcomes as if we hit both. Transfusion reductions would be very complicated in the setting of sickle cell disease because there frequently patients get transfusions in order to reduce their probability of stroke and other outcomes. So that's related to sickle cell pain crises as well. So that is -- would have been a complicated way to be specific with that to be specific on that particular aspect. I do think there's a -- we do believe there's a number of ways you could have designed this trial. And we looked at numerous ways of doing it, whether having VOC as the secondary endpoint. No matter what that anemia and the sequel of anemia and pain crises are going to be front and center in terms of looking at the totality of data. We wanted to -- one of the things we wanted to do with our trial where we landed, what, in the Phase III portion was to give it 2 shots to be statistically positive with hopefully supporting data around either one, or in the best case, around both.

Okay. And we're basically out of time. So I want to just wrap up with a very quick question maybe Chris or Jackie. But touch on upcoming clinical catalysts we have to look forward later this year from your rare disease pipeline, including your academic collaborations with the NIH and RETRACT. And the audience is going to be familiar with your NIH trial, given that we saw data at ASH. Maybe you could just take a few seconds to highlight what's different about the RETRACT trial? And what we can learn from that study?

That's a group of investigators that -- leaders in looking at oxygen scanning, which looks at pliability of red cells. So we'll get some important data there, and that trial goes from 50 to 100 milligrams in 10 patients so -- in its chronic dosing. So that will add to the data that we've seen so far, which has been 6 to 8 weeks of dosing from the NIH study. Other important developments for us are the initiation of the trials in thalassemia or trial in sickle cell disease by the end of the year. Of course, the filings in pyruvate kinase deficiencies are very important. And then our follow-on molecule 946, we're looking to have at least healthy volunteer day by year's end.

Okay. Perfect. I think we are past time. So I think we'll have some very exciting progress to look forward to from mitapivat and your other PKR activator this year, of course. Thanks so much for the discussion, and thanks to everyone in the audience for listening in. Please feel free to disconnect.

Thanks for having us. Take care.

Thank you. Great weekend.

Thank you.