Akebia Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Unaudited consolidated results. Akebia is a clinical-stage biopharmaceutical company developing HIF-based medicines; vadadustat, its lead candidate for CKD-related anemia, was in Phase 3. The company had no approved products and no product-sales revenue.
Financial results
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Collaboration revenue | $48.8m | $28.5m | $94.7m | $49.4m |
| Research and development | $71.9m | $43.8m | $133.3m | $103.8m |
| General and administrative | $12.5m | $6.9m | $21.6m | $12.7m |
| Total operating expenses | $84.5m | $50.7m | $154.9m | $116.5m |
| Operating loss | $(35.7)m | $(22.1)m | $(60.2)m | $(67.1)m |
| Net loss | $(34.1)m | $(21.5)m | $(57.5)m | $(66.1)m |
| Basic and diluted loss per share | $(0.60) | $(0.53) | $(1.09) | $(1.66) |
Revenue came from collaboration arrangements, principally Otsuka and MTPC, and is recognized over performance periods; it is not product-sales revenue. No product gross margin is reported. Q2 operating expenses grew faster than collaboration revenue, widening the quarterly operating and net losses. For the first half, higher collaboration revenue and other income contributed to a narrower net loss despite higher expenses.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $163.5m and available-for-sale securities were $238.6m, or $402.1m combined. Total assets were $413.8m; current liabilities were $164.4m and total liabilities were $247.9m.
- First-half operating cash use was $11.3m, versus $14.8m provided in the prior-year period. Investing activities provided $8.9m; financing activities provided $96.1m, primarily from equity issuance. Cash, cash equivalents and restricted cash increased $93.7m.
- Akebia reported an accumulated deficit of $428.3m and no material financial borrowing was identified in the presented balance sheet; capital-lease obligations were small. Deferred revenue totaled $159.5m, reflecting unearned collaboration consideration.
- Management expected existing cash, securities and committed collaboration funding to support its current operating plan into Q1 2020, while stating that additional capital would be needed for further development and pipeline expansion. This runway is an estimate subject to assumptions and funding timing.
Material changes and management outlook
- First-half collaboration revenue increased $45.3m year over year, including revenue recognized under the Otsuka U.S. and international agreements and $9.3m under MTPC. First-half R&D rose $29.5m, mainly due to Phase 3 trial progress, drug manufacturing and regulatory/clinical activity. G&A increased $8.9m, primarily from Keryx merger-related professional fees and operating support costs.
- Akebia raised $95.4m net from common-stock issuance in the first half, including a March follow-on offering with approximately $84.8m net proceeds. Shares outstanding rose from 47.6m at year-end 2017 to 56.9m at June 30, 2018. The company reported 57.0m shares outstanding at July 31.
- Management targeted full enrollment of INNO₂VATE by year-end 2018 and PRO₂TECT in 2019; anticipated top-line INNO₂VATE data in Q4 2019 or Q1 2020 and PRO₂TECT data in mid-2020, each dependent on major adverse cardiovascular event accrual. Japan Phase 3 readouts were expected in 2019. FO₂RWARD-2 data were expected in the first half of 2019, and TRILO₂GY-2 was expected to begin in late 2018 or early 2019, with data targeted for early 2020.
- Remaining external CRO costs for PRO₂TECT and INNO₂VATE were estimated at $340m–$370m. The filing separately disclosed approximately $200.0m of remaining IQVIA contract costs and $106.3m of other R&D contract costs; these disclosures have different stated scopes and should not be added without reconciliation.
- On June 28, Akebia agreed to acquire Keryx in a stock-for-stock merger, expected by year-end 2018 and subject to shareholder, regulatory and other conditions. The exchange multiplier is 0.37433 Akebia shares per Keryx share; expected fully diluted ownership was 49.4% for existing Akebia holders and 50.6% for Keryx holders. Estimated merger costs were approximately $25m; accrued merger costs were $5.1m at June 30. A $22m termination fee may apply in specified circumstances. Completion also depends on conversion of Keryx’s zero-coupon convertible notes under the related agreement.
- Clinical, regulatory, enrollment, safety, manufacturing, third-party and collaboration risks remain significant. A rosuvastatin interaction study showed approximately two- to threefold higher exposure; further evaluation was ongoing. Management said its current cash-runway estimate did not assure the operating plan or anticipated partner funding.
Investor facts to verify
- Whether the merger received required approvals, closed on schedule, and incurred costs or dilution in line with the disclosed terms.
- Actual trial enrollment, MACE accrual, data timing, safety findings and regulatory requirements for vadadustat.
- Whether collaboration funding and revenue recognition track underlying performance and cash receipts, including the timing of deferred revenue recognition.
- Cash burn, remaining clinical and manufacturing commitments, and whether the stated Q1 2020 runway remains achievable.
- Potential implications of drug-interaction findings, competing HIF-PH inhibitors, intellectual-property proceedings and future reimbursement arrangements.
- The effects of adopting ASC 606 retrospectively: the filing revised 2017 short-term deferred revenue and accumulated deficit by $3.2m, while reporting no change to 2017 operating-statement revenue for the periods shown.