Akebia Therapeutics, Inc. — Q2 2014 Form 10-Q
Business context and reporting period
Unaudited results cover the three and six months ended June 30, 2014, compared with the same 2013 periods. Akebia is a pre-revenue biopharmaceutical company developing HIF-based therapeutics. Its lead candidate, oral AKB-6548, was in a Phase 2b trial for anemia associated with chronic kidney disease (CKD) in patients not on dialysis. The company reported that Phase 2b data were expected in Q4 2014. AKB-6899 remained in preclinical development.
Financial performance and position
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $5.525m | $2.453m | $11.683m | $4.351m |
| General and administrative | $2.315m | $0.668m | $6.066m | $1.347m |
| Operating loss | $(7.840)m | $(3.121)m | $(17.749)m | $(5.698)m |
| Net loss | $(7.618)m | $(2.830)m | $(17.315)m | $(3.451)m |
| Net loss per share, basic and diluted | $(0.39) | $(103.19) | $(9.48) | $(109.21) |
For the six months ended June 30, 2014, operating cash use was $12.677m, investing cash use was $17.717m, and financing provided $104.573m. Cash and cash equivalents were $95.394m and investments were $28.852m at June 30, for total cash, cash equivalents and investments of $124.246m. Current assets were $126.051m and current liabilities were $4.770m. Total liabilities were $4.806m; capital lease obligations totaled approximately $10,000. The filing reports no product revenue, so operating margins are not meaningful.
Material changes versus prior comparable periods
- Q2 net loss rose $4.788m year over year; six-month net loss rose $13.864m. Higher R&D spending primarily reflected continued AKB-6548 Phase 2b trial activity, plus higher personnel, patent and stock-based compensation costs.
- Six-month G&A increased $4.720m, including higher stock-based compensation, IPO-related professional fees, personnel and consulting costs, and severance.
- Six-month 2013 results included a $2.420m gain on extinguishment of debt and other liabilities; its absence contributed to lower other income in 2014. The 2013 six-month net loss also included $0.751m of net interest expense.
- Akebia completed its IPO on March 25, 2014, raising approximately $104.365m net. Preferred shares converted into 12.115m common shares. The company recorded $86.900m of preferred-stock accretion upon conversion; this affected prior-period comparisons of loss applicable to common stockholders and per-share loss. Per-share data also reflect the 1.75-for-1 stock split.
Outlook, risks and unusual items
- Management estimated that IPO proceeds and existing cash and investments would fund projected operating requirements through the first half of 2016. This estimate is subject to change; the company expected significant losses and increasing expenses for several years and may need further financing.
- Subject to positive Phase 2b results, management expected to begin Phase 3 development in 2015 and anticipated a U.S. NDA by 2018 if Phase 3 results were favorable. It also planned an efficacy study in dialysis patients. These are forward-looking plans, not assured outcomes.
- AKB-6899 IND-enabling work was underway, with a possible Phase 1 start in the second half of 2015. The company also described intended AKB-6548 studies in idiopathic anemia of aging.
- Key risks include clinical efficacy, safety and enrollment; regulatory requirements and potential delays; reliance on contract research and manufacturing providers; competition; and the need for additional capital. Akebia depended heavily on AKB-6548 and had no approved products, sales infrastructure or manufacturing facilities.
- Patent proceedings could affect commercialization abroad: Akebia’s European patent is under appeal, it opposed a FibroGen European patent, and it challenged a FibroGen Japanese patent. Outcomes remain uncertain.
- Six-month stock-based compensation was $3.889m versus $0.108m in 2013, including approximately $1.0m related to a modification of awards tied to an employee separation. A $0.324m severance charge was recorded in Q1 2014. Remaining R&D contract costs were approximately $8.157m; contracts were modifiable and cancellable on notice.
Important facts for investors to verify
- Whether the Phase 2b results were delivered as expected and supported advancement of AKB-6548 to Phase 3.
- Whether actual cash burn and trial costs remained consistent with management’s funding runway estimate through the first half of 2016.
- How Phase 3 design, regulatory feedback, enrollment and manufacturing arrangements affected the development timeline and financing needs.
- Developments in the European and Japanese patent proceedings and any resulting impact on AKB-6548’s potential markets.