Shares of Agios Pharmaceuticals (NASDAQ:AGIO) were soaring 22% as of 11:13 a.m. EST on Monday. The big gain came after the company announced that it plans to sell its oncology portfolio to Servier for $1.8 billion in cash upfront.
Agios will also be eligible to receive $200 million in milestone payments in the future for experimental brain cancer drug vorasidenib. In addition, the company will receive royalties on U.S. sales of acute myeloid leukemia drug Tibsovo and vorasidenib.
Investors obviously liked Agios' decision to sell off its oncology portfolio. There are three main reasons why.
First, Wall Street approves of the company's move to focus on genetic diseases. It's difficult for a small biotech to successfully develop and market drugs across multiple therapeutic areas because it stretches resources.
Second, Agios will now have a hefty cash stockpile to fund its pipeline candidates focused on genetic disease. In particular, the company can pour its money and energy into advancing mitapivat. The drug is currently in late-stage testing for treating pyruvate kinase (PK) deficiency, a genetic blood disorder that causes the breakdown of red blood cells.
Third, everyone likes getting cash. And that's exactly what's going to happen for Agios shareholders once the transaction with Servier closes. Agios plans to return at least $1.2 billion to its shareholders.
The Agios board of directors has already approved the sale of the company's oncology portfolio to Servier. The company's shareholders and regulators will also have to give a thumbs-up to the deal. Agios expects the transaction will close in the second quarter of 2021.
What's the next potential major catalyst for the biotech stock? Probably the company's anticipated announcement of results from its Activate-T study of mitapivat in Q1 of next year. If all goes well, Agios should file for regulatory approvals in the U.S. and Europe later in 2021.