Business Context and Reporting Period
Akebia Therapeutics, Inc. (AKBA) is a commercial-stage biopharmaceutical company focused on kidney disease. This Form 10-Q covers the quarterly period ended June 30, 2024. The company's portfolio includes Auryxia (ferric citrate), approved in the U.S. for hyperphosphatemia and iron deficiency anemia, and Vafseo (vadadustat), which received FDA approval in March 2024 for anemia due to chronic kidney disease in dialysis patients. Vafseo is currently being launched in the U.S., with product availability expected in January 2025.
Key Financial Metrics
| Metric | Q2 2024 (3 Months) | Q2 2023 (3 Months) | YTD 2024 (6 Months) | YTD 2023 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $43.6 million | $56.4 million | $76.3 million | $96.4 million |
| Product Revenue (Net) | $41.2 million | $42.2 million | $72.2 million | $77.0 million |
| Net Loss | $(8.6) million | $(11.2) million | $(26.6) million | $(38.1) million |
| Net Loss Per Share | $(0.04) | $(0.06) | $(0.13) | $(0.20) |
| Cash and Cash Equivalents | $39.5 million | $42.9 million (Dec 31, 2023) | $39.5 million | $42.9 million (Dec 31, 2023) |
| Long-Term Debt (Net) | $38.0 million | $17.2 million (Dec 31, 2023) | $38.0 million | $17.2 million (Dec 31, 2023) |
| Operating Cash Flow | Not provided for Q2 | Not provided for Q2 | $(29.5) million | $(13.9) million |
Note: Margins are not applicable as the company is in a net loss position. The company reported a stockholders' deficit of $33.8 million as of June 30, 2024.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 23% year-over-year in Q2 2024. This was primarily driven by a significant drop in license and collaboration revenue ($2.4 million vs. $14.1 million in Q2 2023), which included a one-time $10.0 million upfront payment from Medice in the prior year. Product revenue from Auryxia declined slightly (2%) due to reduced volume, partially offset by price increases.
- Expense Reduction: Research and Development (R&D) expenses decreased 62% year-over-year to $7.6 million, attributed to the completion of certain clinical trials, reduced consulting expenses, and lower headcount costs. Selling, General, and Administrative (SG&A) expenses remained relatively flat.
- Debt Restructuring: In January 2024, the company entered a new $55.0 million term loan facility with BlackRock (Kreos Capital), using proceeds to repay prior Pharmakon term loans. As of June 30, 2024, long-term debt increased to $38.0 million (net of issuance costs) compared to $17.2 million at year-end 2023.
- Inventory Management: The company realized lower costs of goods sold due to the ability to commercially sell inventory previously written down as excess, resulting in a gain of $4.9 million in Q2 2024.
Guidance, Outlook, and Risks
- Commercial Launch: Management expects Vafseo product availability in the U.S. in January 2025. The company is actively engaged in launch initiatives and has applied for Transitional Drug Add-on Payment Adjustment (TDAPA) reimbursement from CMS.
- Liquidity: As of June 30, 2024, the company had $39.5 million in cash. Management believes existing resources and expected revenues are sufficient to fund operations for at least 24 months. However, the company anticipates continuing to incur losses and may require additional financing in the future.
- Subsequent Events: On July 10, 2024, the company terminated its license agreement with CSL Vifor. Under the settlement, the company regained rights to sell Vafseo to major dialysis organizations but agreed to repay a $40.0 million working capital fund through future royalties and pay settlement royalties on net sales.
- Key Risks:
- Loss of Exclusivity (LoE): Auryxia will lose patent exclusivity in the U.S. in March 2025, potentially leading to generic competition and revenue decline.
- Internal Controls: The company identified a material weakness in internal controls over financial reporting related to inventory accounting as of December 31, 2023, which remains unremediated as of June 30, 2024.
- Regulatory and Reimbursement: Success depends on securing favorable reimbursement for Vafseo and maintaining Auryxia sales post-LoE. The inclusion of oral phosphate binders in the ESRD bundle starting January 2025 poses uncertainty.
- Supply Chain: The company relies on third-party manufacturers, including a single source in China for Vafseo drug substance, creating supply chain risks.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the BlackRock Credit Agreement covenants, specifically the requirement to maintain either $15.0 million in cash or $150.0 million in trailing twelve-month revenue.
- Vafseo Launch Timeline: Confirm the January 2025 U.S. market entry date and the status of TDAPA reimbursement approval from CMS.
- Internal Control Remediation: Monitor progress on remediation of the material weakness regarding inventory accounting and related financial reporting controls.
- Auryxia LoE Impact: Assess the potential impact of generic competition on Auryxia revenue starting March 2025 and the effectiveness of the company's strategy to maintain market share.
- CSL Vifor Settlement Terms: Review the specific royalty rates and repayment schedules for the $40.0 million working capital fund and settlement royalties agreed upon in the July 2024 termination agreement.