is Celgene backing a winning horse?

Agios Pharmaceuticals: AGIO

Agios might have a blockbuster drug in AG-221. While only in Phase 1 trials with a long way to go, the initial results seem remarkable and provide some hope for the fifty thousand people a year diagnosed and suffering from acute myelogenous leukemia, or AML. Fewer than a quarter of people that have AML survive longer than five years.

There are about thirty gene mutations that correlate with blood cancers such as AML. One of those mutations produces an enzyme known as IDH-2. When IDH-2 mutates, it creates a molecule that alters the genetic code in a cell causing them to multiply and cause devastating problems.

Enter AG-221. Designed to target a mutated IDH-2 that occurs in about fifteen percent of people diagnosed with AML.

Phase 1 trials are usually meant to evaluate the safety of a possible drug. There are so many drugs that never make it past Phase 1 trials, making AGIO’s AG-221 a risky spec, but there have been some rather remarkable results.

AG-221 was set to be tested on ten people suffering from AML. Unfortunately, three people died before they could participate in the test. Of the seven remaining, most had either substantial chemotherapy or even had bone marrow transplants with very poor results. Of the seven patients in the study, five had gone into complete remission and one went into partial remission. The remaining patient showed no improvement. The only reported side-effect of taking AG-221 has been mild nausea and loss of appetite.

The results of this study were presented in April. A very small test group was used. However, in June, St├ęphane de Botton, a hematologist at the Institut Gustave Roussy, near Paris also presented interesting results at the European Hematology Association conference. de Botton’s findings showed in a study of thirty-five patients, most of them with AML, ten had died at the beginning of the trial from AML complications. Fourteen patients improved on AG-221 and nine went into complete remission with five that became stable but showed no significant change. Only six showed no improvement and this group of patients reported only minor side effects.

Agios has announced that it will present Phase 1 data on its followup drug in development, AG-120 that targets IDH-1 at the Symposium on Molecular Targets and Cancer Therapeutics on Nov. 18-21 in Spain. I suspect the results will be as impressive as AG-221 since it is almost unheard of for a company to present results from a phase 1 study in front of such a distinguished group of physicians.

Agios might be onto a whole different way of looking at cancer. Instead of targeting the cancer by killing the cell, target the enzyme and try to turn those cancer cells back into productive cells.

The icing on the cake is that Celgene (CELG), a fantastic biotech Juggernaut and BHS fave, owns a 17% stake and is footing the bill for AG-221 in exchange for royalties. Celgene and Agios agreed to extend the discovery phase of their strategic collaboration targeting cancer metabolism, extending the initial period of exclusivity to October 2015 which I expect to be renewed or CELG will make an offer for the remaining Agios stock in a takeover bid at some point (can you say “premium?”).

Celgene: CELG

AGIO is a great spec with a lower risk (made possible due to the backing by CELG) and higher reward potential but it is not for the faint of heart. If you are risk adverse, pick up some CELG at $94, trading at a redonc low of 10x 2015 earnings. CELG has been on sale since the hedge fund wankers have decided to cash out for the year. When they get back in next year, CELG will be on the move to $200. AGIO was down today 7%. I am in.

More info: http://www.newyorker.com/magazine/2014/09/15/transformation-3

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