Nov 9, 2013
Executives
David Schenkein – Chief Executive Officer Scott Biller – Chief Scientific Officer Glenn Goddard – Senior Vice President Finance
Analysts
Terence C. Flynn – Goldman Sachs & Co.
Nicholas A. Bishop – Cowen and Company, LLC Geoff Meacham – JPMorgan Chase & Co.
Operator
Good morning and welcome to the Agios Third Quarter 2013 Conference Call. At this time, all participants are in a listen-only mode.
There will be a question-and-answer session at the end. Please be advised that this call is being recorded at Agios’ request.
I would now like to turn the call over to Agios. Please proceed.
Stephanie Ascher
Good morning. This is Stephanie Ascher with Stern Investor Relations and welcome to Agios’ third quarter 2013 conference call.
You can listen to our live webcast or a replay of today’s call by going to the investors section of the website, agios.com. The agenda for today’s call is; David Schenkein, CEO, will discuss highlights of the third quarter and recent business and clinical update; Scott Biller, CFO will provide an update on the Company’s pipeline and R&D efforts; and Glenn Goddard, SVP Finance will review the Company’s financial results.
He will then make closing remarks and open the call for Q&A. Duncan Higgons, COO, will also be available for any Q&A at the end.
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 purposes of the Safe Harbor provision 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 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 represents 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 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.
Therefore you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Now I will turn the call over to Agios’s CEO, David Schenkein.
David Schenkein
Thanks, Stephanie. Good morning, everyone, and thanks for joining us today.
We’re excited to hold our first quarterly conference call since becoming a publicly-traded company on NASDAQ. We’ll be providing important updates on our programs in both cancer metabolism and the inborn errors of metabolism or IEMs.
This has been an important year for Agios, as we made significant progress towards realizing our long-term vision of developing transformational medicines and building a great biopharmaceutical company. Since this is our first earnings call, I’d like to just spend a few minutes on some of the important aspects of Agios that we think are essential to achieving our long-term vision.
Patients along with great science are at the center of every decision we make. We’re uniquely focused on building our product engine and maintaining our competitive first mover advantage in the field of dysregulated metabolism, a disruptive area of biology.
We have core capabilities in chemistry, biology, metabolism and informatics, which have already enabled us to unlock multiple novel targets in our two therapeutic areas, cancer and the IEMs, holding promise for patients and their families. We’re committed to using precision medicine for the development of all of our drug candidates as they enter clinical trials.
We will rigorously select patients for all of our trials, including Phase 1 based on predictive genomic and metabolism based biomarkers. For the IEMs, the genetics of the disease allow for patient selection in all clinical trials.
This precision medicine approach allows rapid testing of proof of concept in humans along with the potential for accelerated clinical development and product approval timelines. We also aspire to become one of the great biopharmaceutical companies in the future.
We have assembled a group of world class scientists with renowned science, technology and leadership capabilities that when coupled with the culture of our organization, our financial strength and our partnerships, including Celgene, enable Agios the potential to discover, develop and commercialize transformational medicines. Now let me run through some of the major highlights of the third quarter.
In July, we successfully completed our Initial Public Offering, raising net proceeds of $111 million. In addition, Celgene purchased $12.8 million of Agios common stock in a separate private placement, concurrent with the completion of the IPO.
This degree of funding allows us to drive our lead programs deep into development. We’re continuing to expand and strengthen our Board of Directors and we were very pleased to add Paul Clancy, Chief Financial Officer of Biogen Idec this past September.
Paul adds tremendous strategic and financial experience to our organization. Importantly, in September we initiated our first clinical trial – a Phase 1 trial of our lead product candidate, AG-221, in a genetically-defined population of patients with a hematological cancer carrying an IDH2 mutation.
IDH2 is a metabolic enzyme mutated in a wide range of cancers. We estimate a prevalence of 11,000 patients in the major markets.
AG-221 is an orally-available, selective and potent inhibitor of the mutated IDH2 protein, making it a highly targeted therapeutic drug candidate. This multi-center, open label Phase 1 study will evaluate AG-221 in patients with advanced hematologic malignancies – AML, MDS and the myeloproliferative disorders.
This study will only enroll patients who are IDH2 mutant positive. In the first stage of the study, patients will receive ascending, twice-daily oral doses of AG-221 in 28-day cycles, using a 3 plus 3 dose escalation schema.
At the completion of the dose escalation stage, several expansion cohorts of patients will receive AG-221 to further evaluate the safety, tolerability and clinical activity. We anticipate using five clinical trial sites for the first stage and currently four of these are already open and enrolling patients.
Additional sites will be opened to facilitate the enrollment of the expansion cohorts. Key objectives in this study include safety, determining maximum tolerated and recommended Phase 2 doses, pharmacokinetics, pharmacodynamics, including the inhibition of the oncometabolite 2-Hydroxyglutarate, or 2HG, and preliminary antitumor activity of AG-221.
2HG is a metabolite that is produced at greatly elevated levels by the mutant IDH enzyme, and therefore serves as an ideal biomarker to follow the inhibition of the mutant IDH enzyme. We expect to announce the data from the dose escalation stage of this study at a major scientific conference late in 2014, depending on the speed of enrollment and the number of required cohorts.
This study has been robustly designed to provide the necessary clinical and scientific information to inform the future development of this candidate. Through our collaboration with Celgene, Agios maintains full control over research and early development through Phase 1 of AG-221.
Celgene has the exclusive option to license worldwide rights to AG-221 and would then be responsible for all future development and commercialization costs. We have the option to co-promote AG-221 in the United States and are eligible to receive up to $120 million in milestones for this program as well as royalties on potential sales.
In addition to AG-221, we continue to advance our broad portfolio of first-in-class drug candidates toward the clinic in both cancer metabolism and the IEMs. This portfolio includes AG-120, our lead IDH1 drug candidate for the treatment of patients with both hematological and solid cancers that harbor IDH1 mutations; and AG-348, our lead IEM drug candidate for the treatment of patients with pyruvate kinase deficiency.
We expect both of these programs to begin clinical trials in 2014. With that, I’ll now turn the call over to Scott.
Scott Biller
Thanks, David. At Agios we’re building a broad first-in class portfolio of drug candidates in cancer metabolism and IEMs.
We engage in a rigorous target validation process that allows only the most promising programs to enter the latter stages of drug discovery. We have been successful at fully validating several novel targets to date, with additional targets currently in various stages of the validation process.
Let me begin with our cancer metabolism pipeline. Our two most advanced cancer programs, AG-221 and AG-120, are targeting mutations in the enzymes IDH2 and IDH1.
These metabolic enzymes are two of the most promising targets in cancer biology today. Research led by Agios scientists validate our beliefs that these mutations are initiating and driving events in many solid and hematological cancers by blocking normal cellular differentiation via the tumor production of the oncometabolite 2HG.
The enzymes are mutated in a wide variety of cancers that in total affect over 40,000 in the major markets. Our drug candidates are potent and selective for the mutated forms of IDH2 and IDH1, and rapidly reduce the level of 2HG to the normal background levels in both cell lines and animal models.
We have a wide therapeutic margin with both of our IDH candidates based on preclinical toxicology studies. David has already reviewed our clinical program for AG-221.
AG-120 is our lead IDH1 clinical candidate and is an orally-available, selective potent inhibitor of the mutated IDH1 protein, making it a highly targeted potential therapy for the treatment of around 31,000 patients. In addition to hematologic cancers like acute leukemia, mutations in IDH1 have been identified in a significant number of patients with difficult-to-treat cancers, such as glioma, chondrosarcoma and cholangiocarcinoma, where the treatment options are limited and the prognosis for patients is poor.
This provides an opportunity for the rapid development of an IDH1 inhibitor. We have substantially completed IND-enabling studies, and we have high confidence in the therapeutic window for this drug candidate as we move into the clinical setting.
We expect to initiate multiple Phase 1 clinical trials in patients with advanced solid and hematologic malignancies that carry an IDH mutation in early 2014. These studies are anticipated to include dose escalation stage followed by multiple expansion cohorts.
Agios has full U.S. rights to AG-120, and Celgene has the exclusive option to license ex-U.S.
rights. Agios and Celgene will equally share development costs; and in addition, we are eligible to receive up to $120 million in potential milestones.
Our research in cancer metabolism continues to deliver novel targets that are now in various stages of validation, chemistry and discovery of predictive biomarkers, with a goal to advance them into development as quickly as possible. More details on these programs will be disclosed at future scientific conferences.
In addition to programs in cancer metabolism, we also continue to build our portfolio of potential medicines to address the severe and neglected genetic diseases of metabolism. A hallmark of IEMs is the abnormal cellular metabolic activity due to a genetic defect that results in the accumulation and/or deficit of certain metabolites, disrupting normal metabolic functions.
Agios is using a novel small-molecule approach to correct the inherited metabolic defects found in IEMs. Since the defective pathways are intracellular and often exhibit serious brain pathology, small molecules are superior to enzyme replacement therapy at accessing the site of action.
Also, we have retained worldwide rights to all of our IEM programs. Our lead IEM candidate, AG-348, is designed to treat pyruvate kinase deficiency, a rare form of hereditary hemolytic anemia that is diagnosed in infancy and results from mutations in pyruvate kinase, an enzyme in glycolysis that provides energy for the red blood cell.
AG-348 is a potent, orally-available small-molecule activator of the mutated pyruvate kinase enzyme, a highly targeted therapeutic candidate for this debilitating disease. We estimate that there are approximately 1,000 to 3,000 of these patients affected in the U.S., with similar numbers in Europe.
There are currently no available treatments other than supportive care, which includes splenectomy, transfusion support and chelation therapy. To further understand pyruvate kinase deficiency, we have commissioned a natural history study that will prospectively follow a group of patients with this disease.
Preclinical data demonstrate that our activators can significantly enhance both the activity and stability of the most common PKR mutations found in patients with pyruvate kinase deficiency, and we therefore expect to use a single molecule for all affected patients. IND-enabling studies for AG-348 are in progress, and we anticipate initiating clinical trials in 2014 including normal, healthy volunteers and patients with pyruvate kinase deficiency.
We believe there is a well-established clinical and regulatory pathway, based on approved medicines developed for the treatment of other anemias. Finally, let me note that at the ASH annual meeting this December, we’ll be presenting preclinical data from all of our lead programs.
Further details will be provided in a press release later today, once ASH makes the abstracts available online. Now I’ll turn the call over to Glenn, to discuss the financials.
Glenn Goddard
Thanks, Scott. Agios is in a very strong financial position today.
We have a robust and efficient R&D plan, as David and Scott have outlined, a successful cancer metabolism collaboration with Celgene, and we believe that we are well capitalized to drive our lead programs to meaningful clinical milestones. As David mentioned, we are very pleased to have successfully completed our Initial Public Offering earlier this year, raising net proceeds of $111 million.
In addition, Celgene purchased an additional $12.8 million through a concurrent private placement. Our Celgene collaboration has been, and we expect it will continue to be, an important source of funding for us.
As we move our lead cancer programs, AG-221 and AG-120 into clinical development, Celgene will fund the majority of the development costs. Moving to our financials, our cash, cash equivalents and investments as of September 30, 2013, were $208 million compared to $128 million as of December 31, 2012.
The increase was primarily driven by the proceeds from our IPO. We expect that our current cash will fund our operations at least until the fourth quarter of 2016.
Our collaboration revenue was $6.3 million for the third quarters in 2013 and 2012. Under our Celgene collaboration, we are recognizing revenue related to the upfront license fee and the October 2012 extension payment over a six-year period.
Research and development expenses were $14.8 million in the third quarter of 2013 compared to $9.8 million in the third quarter of 2012. This increase was largely due to increased spending on clinical activities for AG-221 and IND-enabling activities for AG-120 and AG-348.
General and administration expenses were $2.5 million in the third quarter of 2013 compared to $1.6 million in the third quarter of 2012. The increase was largely due to incremental expenses to support public company operations.
And finally, while we have touched upon some of these already, I’d like to remind you of our upcoming milestones over the coming year. We plan to present preclinical data for each of our lead programs at ASH in December.
We anticipate submitting an IND and initiating clinical trials for AG-120 in patients with hematological malignancies and solid tumors in early 2014. We anticipate submitting an IND and initiating clinical trials for AG-348 in healthy volunteers and patients with pyruvate kinase deficiency in 2014.
And with that, we’ll now open to Q&A. Operator?
Operator
Thank you. We will now begin the question-and-answer session.
(Operator Instructions) And the first question is from Terence Flynn of Goldman Sachs. Your line is open.
Terence C. Flynn – Goldman Sachs & Co.
Hi. Thanks for taking my questions and congrats on IPO.
I was just wondering if you can disclose what the starting dose is in the AML Phase 1 trial, and how that compares to where you saw activity in your preclinical models. And then, maybe remind us what you guys would view as a positive outcome from this trial when we see some of the initial data late next year.
Thanks.
David Schenkein
Yes. Thanks, Terrance.
Good question. So a couple of things.
So, first, we are not disclosing the starting dose, although we were very pleased with our preclinical safety package and the discussions we had with the FDA. So we think we’ve started at an appropriate dose, and one that fits with our overall development plan.
With respect to what we expect to see out of this study, as I have articulated – in the hematologic malignancies, obviously the primary goal will be to evaluate the safety and pharmacokinetics of the molecule. Right now we’re dosing it orally, as you know, twice daily and we’ll look at that depending on the pharmacokinetics.
Obviously, the pharmacodynamic endpoints are very important, because as you know, the tumor produces the high levels of 2-Hydroxyglutarate, which we can measure. And then, obviously, we’ll be looking at efficacy.
And when we look at efficacy in the AML population, we’ll be looking at the standard criteria – whether we have reduced the blast count in the peripheral blood and the bone marrow; whether we’ve induced any remissions; and, importantly, given the mechanism, whether we’ve improved differentiation of the tumor, which is the way we believe these molecules will work.
Terence C. Flynn – Goldman Sachs & Co.
Great. Thanks.
Operator
Thank you. The next question is from Nicholas Bishop of Cowen and Company.
Your line is open.
Nicholas A. Bishop – Cowen and Company, LLC
Thanks for taking my questions. First, just on the ASH data that I guess we’ll see in abstract form later today, it sounds like you are not going to comment too much on that for the next couple of hours, but when the abstracts do come out, will they be wholly representative of what we will be seeing at the meeting or would we expect to see incremental updates at the meeting itself?
David Schenkein
Thanks, Nick. Good question.
So what I can tell you – I obviously can’t tell you too much, because everything is still under embargo by ASH for a little while and we’ll send a press release out later. I think what’s fair to say is that we’re excited that we’ll be presenting on all three of our programs.
This will be preclinical data for IDH1, IDH2, and the PKR program. And I think I can’t give you too much color, but I think it’s fair to say that in general, you’re right.
The abstract is pretty far in advance of the actual meeting and we’ll try and provide as much update as we can above and beyond what’s in the actual abstract. So I think that’s typically what people have strived to do.
Nicholas A. Bishop – Cowen and Company, LLC
Okay. Great.
And then, on the AG-120 and AG-348 programs, I wonder if you could just give a little more detail on what’s kind of gating to getting those IND filings and Phase 1 starts, if anything? And then, maybe just a little bit more on AG-348, specifically.
How will you be looking at – just sort of what’s the plan design in terms of both healthy and diseased patients?
David Schenkein
Yes, thanks. So I’ll start with AG-120, the IDH1 inhibitor.
So that has substantially completed its IND-enabling studies, and so it’s getting all the final reports in; and assembling the IND; and getting that to the FDA. We are very pleased.
We have stated for some period of time now that we expect to be in the clinic in early 2014, and I think we’re very confident of that goal. So that remains on track and doing well.
With respect to AG-348, we haven’t specified exactly when in 2014 we expect to be in the clinic, and that’s because we’re still in the midst of our IND-enabling studies. And until those are completed – although we are confident, until they’re completed, we can’t firm up the timeline.
Likewise, I can’t give you too much detail yet, because we are firming that up now, in terms of what exactly the development program will be. But clearly, this is a non-oncology indication, which gives – affords us the ability to look at some important tolerability and pharmacokinetics work in volunteers, and then move into patients with pyruvate kinase deficiency as quickly as possible, the way many programs in non-oncology will do.
As we get closer to the clinic, we’ll certainly be updating and giving more granularity on what that development plan looks like.
Nicholas A. Bishop – Cowen and Company, LLC
Okay. Just two last quick ones, if I can.
On AG-221, just curious as to whether, as you are getting your sites up and running, whether you are finding patients with these mutations as rapidly as you would have expected? Just any commentary around sort of patient identification rates.
And then an unrelated one, just wondering if you can update us on the status of the glutaminase program.
David Schenkein
Yes. So with respect to the sites – so we’ve been extremely pleased with the way the sites have come up online.
So we picked what we think are world-class sites. I have had a lot of experience with these sites and importantly, these are sites that we’ve been working with for a period of time.
So they have actually been screening their patient population using their local tests for IDH2 and for IDH1, since they’ll participate in those trials as well. So we’ve been very pleased with our ability to identify patients, and I think that really comes down to finding the right sites that really understand how to do early drug development, then have the patient population.
So that’s gone very well. With respect to glutaminase, I’ll turn it over to Scott to give you that.
Scott Biller
Yes. Thanks, Nick.
As you know, and as I mentioned earlier, we do have a robust pipeline of earlier programs. And the glutaminase inhibitor project is one of the most advanced, but we are not talking any further about our research portfolio – but plan to update the scientific community at future conferences.
Nicholas A. Bishop – Cowen and Company, LLC
Okay. Thank you.
Operator
Thank you. The next question is from Geoff Meacham of JPMorgan.
Your line is open.
Geoff Meacham – JPMorgan Chase & Co.
Hey, guys. Thanks for taking the question.
Just had one on AG-348. Are you guys planning on applying for orphan drug status?
And then, maybe, what can you tell us, as you move this along through preclinical, about the pyruvate kinase deficiency – the marketplace itself; the patient population? Maybe if you can just share some of the work that you’ve done with the eligible population and the opportunity here.
David Schenkein
Yes. Thanks, Jeff.
So with respect to orphan status, I think it’s – we are not disclosing any timelines, but I think it’s fair to assume for any disease in which we think we are eligible, where we will be applying for that. Can’t give you any timelines, but you can expect that.
With respect to the patient population, we have spent a considerable amount of time over the past couple of years, and more so now, really digging deep into this patient population. And we are doing that both by speaking with a lot of the hematologists and other investigators, by doing some retrospective chart reviews at sites that have a significant number of these patients.
And as Scott has mentioned, we have kicked off a natural history study that will prospectively follow. I think what I can tell you at this point is that we are beginning to refine our understanding of the patient population and the estimates of the numbers, but not quite ready yet to share that, because it’s not far enough along.
We do know that it is quite a debilitating disease, both in children and adults. And so we think there is a significant opportunity to make a real impact in patients’ lives.
What I am hoping is that over the next period of time, as both our chart review and our prospective study begin to generate some data, that we’ll be able to lay that out, both in publications and at some medical meeting presentations. But we continue to be encouraged about the really important need out there for a therapy for this underserved population that has really nothing for them at this point.
Geoff Meacham – JPMorgan Chase & Co.
And just as a follow-up, is there any geographic bias that you’ve detected early on in your diligence on the indications?
David Schenkein
Yes. So not so far.
There is no evidence of a genetic founder effect, and we know that these patients are around the world. And so we will continue to work globally to identify these patients and the major sites that are treating them now.
And they are seen primarily in the hematology offices, but they can also be seen sometimes in the internal medicine offices.
Geoff Meacham – JPMorgan Chase & Co.
Okay. Thank you.
Operator
Thank you. (Operator Instructions) And I’m not showing any further questions at this time.
I’ll turn the call back over to Agios’ CEO. You may begin.
David Schenkein
Thanks. I just want to thank everybody who joined us today – not only for your time and your attention, but really appreciate your interest in Agios and our efforts to build a great biopharmaceutical company, and importantly, to transform the lives of cancer patients and those with the rare, inborn errors of metabolism.
So hope you all have a good day, and thanks again for joining.
Operator
Ladies and gentlemen, this concludes today’s conference. You may now disconnect.
Good day.