Akebia Therapeutics, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Akebia is a clinical-stage biopharmaceutical company developing therapies based on HIF biology, primarily vadadustat for anemia associated with chronic kidney disease (CKD). It had no product revenue and no approved products.
Financial results and liquidity
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $15.8 million | $6.6 million | $30.5 million | $18.3 million |
| General and administrative expense | $3.9 million | $2.9 million | $11.0 million | $9.0 million |
| Net loss | $19.5 million | $9.3 million | $40.9 million | $26.7 million |
| Net loss per share | $0.68 | $0.47 | $1.62 | $8.16 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $29.5 million | $18.3 million |
At September 30, 2015, cash and cash equivalents were $66.7 million and available-for-sale securities were $90.8 million, totaling approximately $157.5 million. Current assets were $158.8 million and current liabilities $14.2 million. Stockholders’ equity was $145.4 million. The filing reports no material debt; capital lease obligations were $16,000. The company had an accumulated deficit of $141.5 million. As a development-stage company with no sales, conventional gross margin measures are not applicable.
Net cash from financing activities was $78.8 million in the first nine months of 2015, principally reflecting equity proceeds. The April follow-on offering generated approximately $64.6 million net; Q3 at-the-market (ATM) sales generated approximately $14.2 million net. The filing states resources were expected to support the operating plan into Q4 2016, including expected ATM proceeds; it cautions that spending or plans could change and additional financing may be needed. A subsequent event disclosed another $3.9 million net from ATM sales through November 5, 2015.
Changes versus prior comparable periods
- Q3 operating expenses rose $10.1 million year over year, with R&D up $9.1 million, primarily due to preparation for vadadustat Phase 3 non-dialysis studies, plus higher headcount and development costs.
- For the first nine months, operating expenses increased $14.1 million and net loss widened $14.2 million. R&D rose $12.1 million, reflecting Phase 3 preparation, AKB-6899 development, headcount and consulting.
- Operating cash use increased by $11.2 million year over year for the nine-month period. Equity financing was lower than in 2014, which included IPO proceeds; 2015 financing included the follow-on and ATM offerings.
- Loss per share comparisons are affected by the substantially higher 2014 weighted-average share count and the $86.9 million preferred-stock accretion included in 2014 nine-month loss applicable to common stockholders.
Outlook, commentary and principal risks
- Vadadustat completed Phase 2 development. Akebia planned to begin the PRO2TECT Phase 3 program for non-dialysis CKD patients by year-end 2015 and the INNO2VATE Phase 3 program for dialysis patients in 2016. It anticipated a U.S. NDA by 2019 if Phase 3 results support prior findings.
- AKB-6899 remained preclinical; the company targeted an IND submission in Q4 2015 and described ongoing IND-enabling work. These are forward-looking plans, not reported outcomes.
- Management expected significant operating expenses and losses for years, with increased spending for Phase 3 development, manufacturing, regulatory work, and potential commercialization. The company planned to commercialize vadadustat itself in the U.S. and seek collaborators for other markets.
- Clinical, regulatory and commercial outcomes remain uncertain. Key risks include Phase 3 safety or efficacy results, enrollment and trial delays, regulator requirements, reliance on third-party manufacturers and CROs, competition, reimbursement and market adoption, and the need for additional capital and potential dilution.
- A purported securities class action filed in September 2015 alleges misstatements or omissions concerning the vadadustat Phase 2b study. The company said it considered the claims without merit; the case had been removed to federal court and a remand motion was pending. No loss accrual was recorded because the outcome and any loss could not be estimated.
- Patent proceedings remain unresolved. Akebia’s European patent covering vadadustat was under appeal, while challenges to FibroGen patents in Europe and Japan had preliminary favorable developments for Akebia; final outcomes were uncertain and could affect commercialization rights.
- Investment securities totaled $90.8 million, primarily certificates of deposit and U.S. government and corporate debt securities. Management said a 100-basis-point interest-rate change would not materially affect portfolio fair value. Disclosure controls were assessed as effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether the planned Phase 3 programs began on schedule and whether trial design, enrollment, safety or efficacy results changed expectations.
- Actual cash burn, remaining liquidity and the timing and terms of further financing; reconcile the stated Q4 2016 runway with subsequent spending and ATM proceeds.
- Progress and outcome of the securities litigation and the patent opposition and invalidity proceedings, including any potential financial or commercialization impact.
- Whether AKB-6899 met the stated IND timetable and whether any clinical or regulatory milestones were achieved.
- Future share issuance, ATM use and equity compensation, which may dilute existing stockholders.