Agios Pharmaceuticals agreed Tuesday to sell its 15% royalty in a brain cancer drug to Royalty Pharma for $905 million upfront. Agios stock broke out at the opening bell.
Under the terms of the deal, Agios will sell its royalty on potential U.S. net sales of Servier's vorasidenib to Royalty Pharma. If the Food and Drug Administration approves vorasidenib on Aug. 20 — the review date — Agios will receive a $200 million milestone payment.
But Agios isn't letting go of vorasidenib entirely. Royalty will receive the entire 15% royalty on U.S. sales up to $1 billion. After $1 billion, Royalty Pharma will get a 12% royalty on sales, while Agios will retain a 3% royalty.
In a report to clients, RBC Capital Markets analyst Gregory Renza called it a "welcome and optimal move on monetizing a valuable noncore asset." Agios sells a drug called Pyrukynd for patients with anemia and PK deficiency, a disease that chronically destroys red blood cells. But Agios is working to expand the same drug, under the test name mitapivat, to other blood diseases.
"We view the significantly buffed-up cash position as adding financial flexibility as Agios executes on mitapivat's ongoing Phase 3 programs and potential subsequent launches in thalassemia and sickle cell disease while fueling development of earlier-stage pipelines as longer-term growth drivers," he said.
On today's stock market, Agios stock rallied 23.2% to 38.81. Shares broke out of a cup-with-handle base with a buy point at 35.48, MarketSurge shows. Royalty stock rose a fraction to 26.64.
Agios Stock: Cash Flow Positivity Looms
Piper Sandler analyst Christopher Raymond expects Agios to hit positive cash flows if vorasidenib gains approval later this summer. This should help beef up Agios' position as it looks to launch mitapivat in thalassemia treatment in 2025 and in sickle cell disease in 2026.
"We see this as a smart deal for the company and also creates a sizable war chest which Agios can use to enhance or expand their pipeline," he said in a report. "Speaking to management, they agree that this deal should get them to financial independence and they plan to be disciplined with the cash to focus on their near-term opportunities."
Raymond has an overweight rating on Agios stock.
The royalty could also bolster Agios' cash flow, RBC's Renza said. Royalty Pharma estimates that vorasidenib will top $1 billion in peak sales and notes the drug has patent protection until 2038. He has an outperform rating and 44 price target on Agios stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
