On Tuesday, Piper Sandler reaffirmed its Overweight rating on shares of Agios Pharmaceuticals (NASDAQ:AGIO) with a $45.00 price target. This confirmation follows Agios Pharma (NASDAQ:AGIO)'s announcement of a $905 million purchase agreement with Royalty Pharma for the royalty rights to the U.S. sales of the drug candidate vorasidenib.
Agios Pharma had previously sold much of its oncology portfolio to Servier, which included a deal for Agios to receive a 15% royalty on vorasidenib's sales and a $200 million milestone payment upon the drug's approval.
The analyst from Piper Sandler noted that the combination of the new agreement with Royalty Pharma and the expected payment from Servier could lead to a substantial payout of approximately $1.1 billion for Agios Pharma if vorasidenib receives approval. The Prescription Drug User Fee Act (PDUFA) date for vorasidenib is set for August 20, 2024. The financial windfall from these agreements is projected to bring Agios Pharma to a cash flow positive status, potentially eliminating the need for further capital raises and providing funding for the launches of mitapivat for thalassemia and sickle cell disease (SCD).
The analyst indicated that while there is no change to their financial model or price target at this time, they expect Agios Pharma's shares to respond positively to the news of the deal. The anticipation is that the significant potential payout would position Agios Pharma favorably for its upcoming drug launches and overall financial health.
InvestingPro Insights
With the recent reaffirmation of an Overweight rating by Piper Sandler and a positive outlook on Agios Pharmaceuticals' financial future, it's worth noting some key metrics and insights from InvestingPro. Agios holds a significant cash position relative to its debt, which aligns with the expectation of becoming cash flow positive following potential approvals and payouts related to vorasidenib. Additionally, the company has been experiencing a large price uptick over the last six months, reflecting a 41.89% six-month total return, demonstrating market optimism. However, Agios is not expected to be profitable this year, as noted by analysts, and it has been quickly burning through cash with a gross profit margin of -919.62% for the last twelve months as of Q1 2024.
InvestingPro Tips highlight that the company's liquid assets exceed its short-term obligations, which may provide some financial flexibility in the near term. Furthermore, three analysts have revised their earnings upwards for the upcoming period, suggesting a potential improvement in financial performance. For investors looking for more in-depth analysis and additional tips, InvestingPro offers a comprehensive list of insights, with 6 more tips available for Agios Pharmaceuticals at https://www.investing.com/pro/AGIO. To access these insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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