Agios CEO Fouse On Building A Sustainable Business Model
Executive Summary
In the midst of another restructuring, the company is transitioning from a drug discovery company to a more externally focused R&D model; CEO Jackie Fouse talked to Scrip about the changes at Agios.
Having shifted its commercial and research focus from cancer to non-cancer hemolytic rare diseases last year, Agios Pharmaceuticals, Inc. is now paring back on drug discovery research to focus on advancing a later-stage portfolio of drugs, including potentially ones that will be externally sourced. It's a significant change for a company that was initially established in 2008 as a drug discovery company, but CEO Jackie Fouse said it is all part of an evolution to develop a sustainable business model and tap current market opportunities.
Fouse talked to Scrip in an interview on 18 May about the R&D reorganization, how the company hopes to direct some of its $1.2bn in cash toward business development and the launch of its first non-cancer drug, Pyrukynd (mitapivat).
"We are trying to focus our internal efforts and evolve the research model to move more to a balanced approach, having some internal preclinical programs, but also [looking] to the outside world for ongoing innovation," Fouse said.
Agios announced the R&D reorganization on 16 May and will eliminate 50 research jobs focused on exploratory research. The company will retain a core team of about 50 in R&D who will be focused on advancing the company's existing clinical-stage pipeline and new preclinical or clinical-stage assets that are brought into the company. The initiative is expected to deliver annual average cost savings of $40m-$50m between 2023 and 2026.
Along with those changes, the company announced that chief medical officer Sarah Gheuens will take over as head of R&D at the end of July and chief scientific officer Bruce Car will step down.
The R&D changes are about more than just cost savings, Fouse said, and stem partly from another big change Agios made last year, when it sold its cancer portfolio to French drug developer Les Laboratoires Servier for roughly $2bn. (Also see "Agios Sells Cancer Portfolio To Servier To Focus On Genetic Diseases" - Scrip, 21 Dec, 2020.) The company gave up two commercial drugs, the IDH2 inhibitor Idhifa (enasidenib) and IDH1 inhibitor Tibsovo (ivosidenib), and pipeline assets in the deal, which management felt would better position the company as a unique player in an underserved area.
"As we were transitioning the cancer business to Servier, the research organization was the one that was probably the most impacted," Fouse said. Some Agios researchers moved to Servier to help the company build its US research capabilities when the deal closed. "After we transferred people to Servier, we were looking at how we were approaching research, how we were resourced and how we are positioned for the future," the CEO explained.
Turning To Business Development
By looking externally, the company now hopes it may be able to get some new drugs to market faster in areas that complement its current focus on genetically defined rare diseases, and specifically hemolytic anemias.
The company has been evaluating potential business development opportunities, and Fouse said Agios could finalize a deal soon.
"We have some things that we think could make a lot of sense, so if we can get deals done, we will get them done," she said. The focus is on assets in non-malignant hematology, as well as other diseases of inborn errors of metabolism.
By freeing up expenses in early R&D, Fouse said the company may even be able to buy later stage clinical assets or commercial assets.
"There are some companies now, given the current environment, that are reprioritizing, and there are some commercial-stage products that may become available," she said.
The company is in a unique position for a restructuring biotech in the current environment as it is well capitalized, with $1.18bn in cash as of 31 March, gained in part from the sale of its cancer portfolio. It gives the company some flexibility to shop for deals and reach a positive cash flow position.
"We don't think we need to raise equity at all at any timepoint based on our current base plan," Fouse said. "At the same time, we are mindful of being efficient with that cash and not taking anything for granted." The company's plan calls for achieving cash flow positivity in 2026.
Pyrukynd Launch Underway
In the near-term, the company's focus remains on the launch of Pyrukynd for the rare genetic blood disorder pyruvate kinase (PK) deficiency, securing approval in Europe and expansion to new indications, including to thalassemia, pediatric PKD and sickle cell disease.
Pyrukynd was approved by the US Food and Drug Administration in February for hemolytic anemia in adults with PKD, a genetic disease caused by mutations in the PKLR gene that can cause a deficit in energy and shortened lifespan for red blood cells. (Also see "Agios Anticipates PK Deficiency Diagnosis Ramp-Up After Pyrukynd Approval" - Scrip, 21 Feb, 2022.)
The early launch is expected to face some challenges, as the diagnosis rate of PKD is low, about 30%, for a disease that only affects about 3,000 people in the US. The company has implemented diagnostic testing and education programs to try to increase the rate of diagnosis to 70%.
"It's going to be a steady thing. It's not going to be that it jumps from one day to the next," Fouse said. The company is planning to update investors on some of the launch metrics during the company's second quarter financial call, which will be the drug's first full quarter on the market.
"We have scripts being written. We have refills. We are seeing some things that are really favorable to the ongoing ramp of the revenues," she added.
Agios believes Pyrukynd could evolve into a blockbuster brand over time. The company think it could generate more than $1bn in sales from the indications in PKD and thalassemia alone, and that with an indication in sickle cell disease, it could grow to more than a $2bn product.
Despite the new drug approval and a solid cash foundation, the company's stock price has been on a steady decline this year, experiencing some of the same market volatility that has hit the sector more generally. The company's stock price is down 38.7% from 4 January, opening 19 May at $21.21.
But Fouse acknowledged that some of the reset in the biotech sector over the last year has been have warranted.
"Investors are a little bit irrationally negative right now, but they are also trying to figure out how to pick a winner," she said.
"Companies that have a strong track record of execution and continue to execute and are prudent about how they spend their money will keep their heads down and in the end, the fundamentals will return to some degree of rationality," she predicted.