Akebia Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The unaudited results are consolidated; financial amounts below are in U.S. dollars and millions unless noted.
Business context and reporting period
Akebia is a kidney-disease-focused biopharmaceutical company. Its U.S. commercial product is Auryxia (ferric citrate). Vadadustat is approved in several countries outside the U.S. and remains subject to FDA review for dialysis-dependent CKD patients. The company reported an accumulated deficit of $1.61 billion and has not achieved profitability.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $42.0 | $48.7 | $138.4 | $236.7 |
| Product revenue, net | $40.1 | $42.0 | $117.1 | $126.7 |
| License, collaboration and other revenue | $1.9 | $6.7 | $21.4 | $110.0 |
| Gross profit / gross margin | $24.0 / 57.2% | $10.4 / 21.4% | $82.9 / 59.9% | $147.7 / 62.4% |
| Operating loss | $(13.0) | $(50.4) | $(47.6) | $(75.9) |
| Net loss | $(14.5) | $(54.1) | $(52.5) | $(88.2) |
| Operating cash flow | Not separately stated | Not separately stated | $(21.1) | $(18.5) |
Q3 product revenue fell 4% year over year; nine-month product revenue fell 8%, attributed mainly to lower volume, changing payer mix and contraction in the phosphate-binder market, partly offset by January and July price increases. Nine-month total revenue declined 42%, largely because 2022 included substantial Otsuka collaboration and termination-related revenue. Gross margin improved sharply in Q3 as product cost of goods sold declined, including lower inventory write-downs and lower prior excess-purchase-commitment charges; nine-month margin was lower year over year.
Research and development expense was $13.3 million in Q3 and $53.2 million for nine months, down 52% and 46%, respectively. Selling, general and administrative expense was $22.7 million and $74.8 million, down 29% and 31%. Management attributed reductions principally to lower vadadustat development spending, lower headcount and other cost reductions following 2022 workforce reductions.
At September 30, cash and cash equivalents were $46.5 million (restricted cash was $1.6 million); total cash, cash equivalents and restricted cash were $48.2 million. Cash and cash equivalents were $90.5 million at December 31, 2022. Nine-month financing cash outflow was $23.9 million, primarily reflecting $24.0 million of term-loan repayments. Current assets were $109.6 million and current liabilities $79.7 million, or working capital of approximately $29.9 million. Stockholders’ deficit was $39.4 million.
Pharmakon term-loan principal outstanding was $43.0 million at quarter-end; the stated annual rate was 11.15%. On October 31, 2023, Akebia amended the loan: maturity was extended to March 31, 2025, principal payments were deferred until October 2024 under the amended schedule, and the SOFR cap was removed. The balance sheet also included a $40.3 million long-term refund liability to CSL Vifor related to its working-capital fund.
Material changes and unusual items
- Q3 and nine-month losses narrowed versus 2022, principally with lower operating expenses and product costs. Prior-period collaboration revenue makes the total-revenue comparison particularly pronounced: 2022 included Otsuka-related revenue, while 2023 included a $10.0 million Medice upfront license payment in the first half.
- The FDA acknowledged Akebia’s vadadustat NDA resubmission as complete in October 2023 and set a March 27, 2024 PDUFA date. The resubmission seeks approval for dialysis-dependent CKD patients, not the broader population originally pursued.
- Akebia recorded a $0.5 million loss on termination of the Boston office lease in the first half of 2023. It also recorded a $5.0 million BioVectra termination-fee accrual in current liabilities; the remaining payments arise from a prior manufacturing-agreement termination.
- Auryxia’s U.S. generic entry is expected under settlements beginning March 20, 2025, subject to FDA approval and specified earlier-entry provisions. Akebia identifies March 2025 as the product’s U.S. loss-of-exclusivity period.
Outlook, risks and contingencies
Management believes cash resources and expected product, royalty and license revenue will fund its current operating plan for at least 12 months from the filing date. This is conditional: management warns that weaker-than-planned performance or failure to obtain U.S. approval for vadadustat could adversely affect liquidity and future going-concern prospects. Akebia may need additional financing; availability and terms are uncertain, and equity financing could dilute shareholders.
Key commercial and regulatory risks include declining Auryxia volume and market contraction, generic competition around March 2025, and uncertainty about FDA approval and commercialization of vadadustat. The FDA’s prior complete response letter cited concerns including MACE results in non-dialysis patients, vascular-access thrombosis in dialysis patients and potential drug-induced liver injury. Management also noted that Medice’s launch in some territories would be later than previously anticipated. Reimbursement, partner execution, manufacturing and single-source supplier dependence, and the Vifor agreement’s potential repayment obligations are additional risks. The company has $18.1 million of minimum Auryxia drug-substance purchases through 2024 and $14.9 million of vadadustat drug-substance commitments through Q2 2024.
Disclosure controls and procedures were deemed ineffective as of September 30, 2023 because of an unremediated material weakness in controls over Auryxia product-return reserves. The weakness had led to revisions of prior-year financial statements for 2020–2022. Management is implementing remediation measures, but stated the weakness will remain until controls operate effectively and are tested. A stockholder securities action relating to the Keryx merger remains pending; the company denies wrongdoing and says it cannot reasonably estimate a loss range. The company reports that it was in compliance with Pharmakon covenants at quarter-end; the loan includes Auryxia sales and other covenants, with potential acceleration upon default.
Important facts for investors to verify
- FDA’s March 27, 2024 PDUFA decision and any resulting label, safety restrictions or post-marketing requirements for vadadustat.
- Actual cash burn and financing needs against management’s stated 12-month runway, including the effect of the uncapped SOFR rate and loan covenants.
- Auryxia prescription volume, payer mix, return reserves and generic-entry timing and impact.
- Progress and testing of remediation for the product-return-reserve material weakness, and any further financial-statement revisions.
- CSL Vifor refund-liability terms and repayment exposure, including implications of vadadustat reimbursement and agreement termination provisions.