Agios secures $905M from Royalty Pharma for cancer drug

Agios Pharmaceuticals has reached an agreement with Royalty Pharma to sell the rights to royalties on a brain cancer drug it originally developed and subsequently sold to Servier. According to the terms disclosed on Tuesday, Agios is set to receive $905 million in cash from Royalty Pharma, contingent upon the drug, vorasidenib, obtaining approval from U.S. regulatory bodies. In return, Royalty Pharma will gain a 15% royalty on annual U.S. sales up to $1 billion and a 12% royalty on sales exceeding $1 billion. Agios will retain 3% royalties on U.S. sales that surpass the $1 billion mark.

Royalty Pharma anticipates that vorasidenib will generate more than $1 billion in annual sales in the U.S., resulting in over $150 million in yearly royalties. The royalty stream is projected to continue until 2038. The FDA is expected to decide on the approval of vorasidenib for a specific type of glioma by August 20.

Strategic Advantages for Agios

This arrangement provides Agios with an opportunity to benefit once again from its oncology research, an area in which it has historically excelled. Founded in 2007 and initially led by GV general partner David Schenkein, Agios achieved significant success by developing and securing approval for two leukemia treatments within a decade. However, the company faced challenges in commercializing these drugs and incurred substantial losses, which eventually led it to pivot towards rare diseases. This strategic shift culminated in the sale of its entire cancer drug portfolio to the French pharmaceutical company Servier for $1.8 billion in 2020.

The transaction with Servier included marketed drugs such as Tibsovo, along with three experimental treatments, one of which was vorasidenib, then in advanced testing for low-grade gliomas. While Servier obtained full rights to the drug, Agios was promised a $200 million milestone payment upon the drug's approval in the U.S., along with a share of U.S. royalties.

Financial Implications and Future Prospects

The agreement with Royalty Pharma, coupled with the earlier deal with Servier, positions Agios favorably to achieve positive cash flow without needing additional capital raises. Piper Sandler analyst Christopher Raymond noted that this financial stability would enable Agios to fund the launches of its drugs mitapivat for beta thalassemia and sickle cell disease, projected for 2025 and 2026 respectively. Raymond described the deal as a strategic move that not only strengthens Agios' financial standing but also provides resources to enhance or expand its pipeline.

Royalty Pharma's Investment Strategy

Meanwhile, this agreement is part of a broader series of recent investments by Royalty Pharma. Earlier this month, Royalty Pharma invested $525 million to acquire a stake in an autoimmune disease drug owned by Sanofi. Prior to this, the company purchased rights to Roche's spinal muscular atrophy treatment Evrysdi, a cancer therapy from Ferring Pharmaceuticals, and a schizophrenia medication from Karuna Therapeutics.

In summary, the agreement between Agios Pharmaceuticals and Royalty Pharma not only secures significant immediate funding for Agios but also ensures a continued revenue stream from vorasidenib, assuming it receives regulatory approval. This deal is a smart financial and strategic move for both companies, solidifying Agios' focus on its core strengths and expanding Royalty Pharma’s diverse investment portfolio.

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