Agios Prices Upsized IPO Above Range, Preps For Nasdaq Debut

Xconomy Boston — 

Agios Pharmaceuticals is about to find out how willing public investors are to throw their dollars behind the promise—if not the clinical data—of cancer metabolism. If the early signs are any indication, they’re up for the risk.

Cambridge, MA-based Agios priced its IPO late Tuesday, selling 5,888,888 shares at $18 apiece for a raise of roughly $106 million. Agios upsized the offering from the 5 million shares it initially planned to sell, and blew past the $14 to $16 per share range it set on July 16, giving it a first-day market capitalization of more than $500 million.

In addition, Summit, NJ-based Celgene (NASDAQ: CELG), an existing investor and strategic partner of Agios, is buying $12.75 million in Agios shares at the IPO price in a separate transaction. Should the underwriters buy up the extra 883,333 shares they have the 30-day option to purchase, more than likely given the reception Agios has gotten in its IPO, Agios will have raised a total of about $135 million from the offering and the Celgene transaction. Agios will begin trading on the Nasdaq under the symbol “AGIO” on Wednesday.

Agios’ largest shareholders prior to the IPO were Third Rock Ventures (23.65 percent stake), Celgene (17.05 percent), Arch Venture Partners (16.41 percent), Flagship Ventures (16.41), and entities associated with Fidelity Management (9.86 percent).

Agios has raised a total of $261.2 million since its inception, but $120 million of that is equity financing, while the remaining $141.2 million comes from collaboration payments doled out by Celgene as part of a big early-stage partnership between the two. Celgene has poured $178.7 million in total into Agios, counting the $37.5 million in equity it bought prior to the IPO, according to the company’s IPO prospectus.

The offering continues biotech’s scalding hot IPO renaissance, even among companies that are short on clinical data but long on expectations. Epizyme (NASDAQ: EPZM) and Bluebird Bio (NASDAQ: BLUE)—two of the most successful life sciences IPOs of the year—have only just begun gathering data from clinical trials needed for FDA approval of their products. Agios, which still hasn’t tested any of its drugs in human patients, is the latest example.

Agios was created in 2007 based on the concept of creating drugs that starve cancer cells by blocking the mutated metabolic enzymes that feed them. The company’s two most advanced drugs, known as AG-120 and AG-221, target enzymes known as IDH1 and IDH2, which researchers say are mutated in a wide range of cancers. Agios’ plan is to identify patients with those specific mutations and treat them. It has a partnership in place with Cambridge-based Foundation Medicine to create diagnostics for those programs.

Agios was co-founded by three of the pioneers in the cancer metabolism field: Harvard Medical School’s Lewis Cantley, the University of Toronto’s Tak Mak, and current Memorial Sloan-Kettering Cancer Center CEO Craig Thompson. Arch and Flagship seeded the company before bringing Third Rock in as part of a $33 million Series A round that closed in January 2008.

Third Rock partner Kevin Starr stepped in as Agios’ CEO as part of the Series A before handing the reins to Genentech’s former head of cancer drug development, David Schenkein, and the company officially put itself on the map in 2010 when it inked a big partnership with Celgene well before even putting one drug into a clinical trial. In that deal, Celgene poured $130 million into Agios for the exclusive option—for three years—to license and develop any of the company’s cancer drugs (Agios is also eligible to receive an additional $120 million in milestone payments for each drug Celgene chooses to license). Celgene, for example, has an option for worldwide rights to AG-221 and AG-120, though Agios has the option to retain the U.S. rights to the latter drug, according to the IPO prospectus.

Celgene later paid Agios $20 million to expand the relationship to four years. Though the agreement expires in April 2014, Celgene has the option to extend it another two years.

Agios later expanded its breadth into a class of diseases known as inborn errors of metabolism, or IEMs, which are caused by mutations or defects in metabolic genes that cause substances to build up in the body and muck up metabolic functions.

But even with the backing of Celgene and a high-powered executive team, Agios is still a pre-clinical company and carries a ton of risk along with it. Agios estimates that AG-221 will begin its first clinical trial this year, and AG-120 will follow by early 2014 along with its most advanced drug candidate for IEMs (AG-348). That drug targets a rare form of inherited anemia known as pyruvate kinase deficiency for which there is no effective treatment.

In addition, a number of pharmaceutical companies such as AstraZeneca, Eli Lilly, Roche/Genentech, GlaxoSmithKline, and Novartis have drugs in preclinical development that target cellular metabolism to treat cancer and IEMs, according to the prospectus.

J.P. Morgan Securities, Goldman Sachs, Cowen and Co., and Leerink Swann are underwriting the offering. J.P. Morgan and Goldman Sachs are serving as joint book-running managers.