Akebia Therapeutics, Inc. current report, 12 May 2017

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Business Context and Reporting Period

Company: Akebia Therapeutics, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 12, 2017
Principal Executive Offices: Cambridge, Massachusetts
Context: Akebia, an emerging growth company, announced a strategic partnership and investment transaction with Vifor (International) Ltd. regarding its lead product candidate, vadadustat, an oral hypoxia-inducible factor (HIF) stabilizer for anemia related to chronic kidney disease (CKD).

Key Financial Metrics and Transaction Details

This filing details a specific transaction rather than periodic financial performance. Key financial terms include:

  • Investment Proceeds: Akebia sold 3,571,429 shares of common stock to Vifor for a total of $50 million.
  • Share Price: $14 per share, representing approximately a 40% premium to Akebia's 90-day average stock price.
  • Contingent Milestone: Vifor is obligated to pay a $20 million milestone upon FDA approval of vadadustat for dialysis-dependent CKD patients and inclusion in a bundled reimbursement model.
  • Profit Sharing: Akebia will receive a majority of the profit from Vifor's sales of vadadustat to Fresenius Kidney Care Group LLC (FKC) in the United States.
  • Revenue Recognition: The filing does not provide current revenue, profit, cash flow, or margin data as this is a current event report, not a periodic financial statement.

Material Changes and Agreements

The filing reports the entry into two material definitive agreements on May 12, 2017:

  1. License Agreement: Akebia granted Vifor an exclusive license to sell vadadustat solely to FKC in the U.S. Akebia retains rights to commercialize vadadustat for non-dialysis dependent CKD patients and other dialysis organizations in collaboration with Otsuka Pharmaceutical Co., Ltd.
  2. Investment Agreement: Vifor purchased the aforementioned shares. Vifor agreed to a lock-up restriction and a standstill agreement. The shares were issued under Section 4(a)(2) and Rule 506 exemptions.
  3. Supply Arrangements: Prior to FDA approval, Akebia will supply Vifor's requirements for vadadustat. Vifor will subsequently supply FKC.

Guidance, Outlook, Risks, and Contingencies

Outlook and Conditions:

  • The $20 million milestone and profit share are contingent upon FDA approval and specific reimbursement models.
  • Vifor may terminate the agreement with 12 months' prior written notice after the release of the first topline data from the global Phase 3 program.
  • Akebia expects to file the full text of the agreements in its Form 10-Q for the quarter ending June 30, 2017.
Risks and Uncertainties:
  • Failure to achieve the $20 million milestone.
  • Potential termination of the agreement by either party.
  • Delays or failure in the clinical development of vadadustat.
  • Capital constraints affecting the ability to fund development or operations.
  • Regulatory decisions and patent enforcement challenges.

Investor Verification Checklist

  • Verify the exact terms of the profit share arrangement and the definition of "profit" in the full License Agreement (expected in Q2 2017 10-Q).
  • Confirm the status of the vadadustat global Phase 3 program and the timeline for topline data release, which triggers Vifor's termination rights.
  • Review the specific conditions required for the $20 million milestone payment, particularly the "bundled reimbursement model" requirement.
  • Assess the impact of the 40% premium stock sale on existing shareholder dilution and the lock-up period duration for Vifor.
  • Monitor the relationship between Akebia, Vifor, and Otsuka regarding the sharing of milestone payments and revenue.