On Tuesday, TD Cowen maintained a Buy rating on Agios Pharmaceuticals (NASDAQ:AGIO), focusing on the company's financial prospects following a significant transaction. Agios has recently sold the rights to a 15% royalty on U.S. net sales of vorasidenib, a drug pending FDA approval, to Royalty Pharma (RPRX) for sales under $1 billion. If U.S. net sales exceed $1 billion, Agios will retain a 3% royalty. This deal, along with a $200 million milestone payment from Servier, positions Agios with a proforma cash balance of approximately $1.6 billion.
The firm noted that Agios's current enterprise value, which stands at around $500 million, does not fully reflect the potential of mitapivat, Agios's drug for thalassemia and sickle cell disease (SCD). The analyst pointed out that the transaction's value of $905 million surpassed market expectations, which had estimated the royalty's worth in the mid to high hundreds of millions.
The sale of the royalty rights was characterized as leveraging a "non-core" asset, a move that had been widely anticipated by both management and investors. The successful monetization of the royalty at a value significantly higher than market predictions was highlighted as a positive outcome.
The transaction with Royalty Pharma was announced earlier in the week, marking a strategic step for Agios in strengthening its financial position. The analyst's commentary underscores a strong conviction in the intrinsic value of Agios shares, bolstered by the recent financial developments.
InvestingPro Insights
InvestingPro data provides a deeper dive into Agios Pharmaceuticals' financial health and market performance. With a market capitalization of $2.17 billion, Agios stands out with a notable revenue growth of 54.61% over the last twelve months as of Q1 2024. Despite not paying dividends, the company has seen a large price uptick of 41.89% over the past six months, trading near its 52-week high at 96.32% of that peak.
InvestingPro Tips highlight that while Agios holds more cash than debt on its balance sheet, analysts are concerned about the company's cash burn rate and weak gross profit margins. Furthermore, three analysts have revised their earnings upwards for the upcoming period, indicating potential optimism in the company's future performance. However, they do not anticipate Agios to be profitable this year, and the company is trading at a high revenue valuation multiple. Investors should note that Agios has liquid assets that exceed its short-term obligations, which may offer some financial flexibility.
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