Akebia Therapeutics, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Akebia is a renal-focused biopharmaceutical company; its commercial product is Auryxia, while vadadustat remained investigational and in global Phase 3 development at filing.
Financial performance and position
| Metric | FY2019 | FY2018 |
|---|---|---|
| Total revenue | $335.0 million | $207.7 million |
| Auryxia net product revenue | $111.1 million | $6.8 million |
| License, collaboration and other revenue | $223.9 million | $200.9 million |
| Cost of goods sold | $145.3 million | $7.8 million |
| Research and development expense | $323.0 million | $291.0 million |
| Selling, general and administrative expense | $149.5 million | $87.1 million |
| Operating loss | $286.3 million | $178.2 million |
| Net loss | $279.7 million | $143.6 million |
| Net loss per share, basic and diluted | $2.36 | $2.47 |
| Cash, cash equivalents and available-for-sale securities at year-end | $147.7 million | $321.6 million |
| Working capital at year-end | $101.4 million | $202.6 million |
| Net cash used in operating activities | $257.4 million | $97.5 million |
| Long-term debt, net, at year-end | $75.8 million | None reported |
Reported cost of goods sold exceeded Auryxia product revenue. The 2019 cost includes a $70.4 million purchase-accounting inventory step-up charge and $36.4 million of acquired-intangible amortization, so reported product economics were materially affected by these items. The filing does not provide a comparable standalone Auryxia gross margin for the full 2018 year: Akebia began recording U.S. product sales only after the December 12, 2018 merger.
In the fourth quarter of 2019, product revenue was $28.9 million, collaboration and other revenue was $40.6 million, and net loss was $94.5 million.
Changes versus the prior year
- Total revenue rose $127.3 million, primarily reflecting a full year of Auryxia sales after the Keryx merger; FY2018 included only the final 20 days of product revenue. Collaboration revenue also increased by $23.0 million.
- Net loss widened by $136.1 million. Operating expenses increased by $97.8 million, including higher R&D and commercialization spending; cost of goods sold increased substantially with Auryxia sales and purchase-accounting charges.
- Operating cash outflow increased to $257.4 million, principally reflecting Phase 3 program spending, inventory payments and merger-related liabilities. Cash and securities declined $173.9 million year over year, despite debt and equity financing.
Outlook, risks and unusual items
- Management expected cash resources and a potential $15.0 million MTPC regulatory milestone, contingent on vadadustat approval in Japan, to fund its current operating plan well into 2021. Management also stated additional capital would be required for continued operations and development; this runway estimate depends on assumptions and partner funding.
- Management expected collaboration revenue to decline in the near term as the INNO2VATE and PRO2TECT Phase 3 studies approached completion. It expected R&D expense to decrease in 2020 as the trials neared data readouts, while SG&A was expected to be relatively consistent with 2019.
- Top-line global Phase 3 results were expected beginning in Q2 2020 for INNO2VATE and in mid-2020 for PRO2TECT. Vadadustat’s efficacy and cardiovascular safety versus darbepoetin alfa remained to be established; U.S. approval and commercialization were not assured. MTPC had submitted a Japanese application in 2019.
- Akebia borrowed $80.0 million under a Pharmakon term loan in November 2019 and could draw an additional $20.0 million through December 31, 2020, subject to conditions. The loan is secured by specified assets, including Auryxia-related assets, and carries quarterly Auryxia net-sales and, from 2021, minimum-liquidity covenants. The company reported no default at year-end.
- CMS’s 2018 decision excluded Auryxia’s IDA use from Medicare Part D coverage and imposed prior authorization for the covered hyperphosphatemia use. Akebia’s challenge was pending appeal after denial of a preliminary injunction in February 2020. Generic Auryxia patent litigation was ongoing; a settlement with one filer allowed licensed entry from March 20, 2025, subject to FDA approval and specified earlier-entry conditions.
- Other material risks include dependence on Auryxia and collaboration funding, potential generic competition, clinical and regulatory outcomes, reimbursement and pricing, third-party manufacturing and supply, and legal and intellectual-property proceedings. The filing also identified possible COVID-19 disruption to trials, supply and commercial activity.
- Akebia and its auditor reported a material weakness in inventory controls covering reconciliations, costing validation, and expiry/reserve assessments. No financial-statement adjustment was required; remediation was underway. The auditor gave an adverse opinion on internal control over financial reporting, while issuing an unqualified opinion on the financial statements.
- Unusual reported items include the $70.4 million inventory step-up charge and $36.4 million intangible amortization in cost of goods sold, plus $7.1 million of inventory write-downs. The company also entered a February 2020 arrangement concerning a potential FDA Priority Review Voucher; a $10.0 million payment and assignment depended on closing and further agreements.
Important facts for investors to verify
- Whether the global vadadustat Phase 3 results met efficacy and cardiovascular-safety objectives and supported regulatory filings.
- Updated cash runway, operating cash burn, collaboration funding and financing needs, including any draw on the remaining loan tranche.
- Auryxia sales trends, Medicare coverage litigation outcome, inventory levels and potential generic-entry timing.
- Progress in remediating the inventory-control material weakness and any subsequent auditor assessment.
- Exposure to loan covenants, manufacturing commitments, patent litigation and other contingent liabilities.