Akebia Therapeutics, Inc. — Q3 2014 Form 10-Q
Reporting period: Three and nine months ended September 30, 2014; filed November 10, 2014. Akebia is a clinical-stage biopharmaceutical company developing HIF-based therapies, principally oral AKB-6548 for anemia associated with chronic kidney disease (CKD). It has no approved products and has generated no product revenue.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Margins are not meaningful because the company had no revenue.
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $6.6 | $3.2 | $18.3 | $7.6 |
| General and administrative | $2.9 | $0.8 | $9.0 | $2.1 |
| Operating loss | $(9.6) | $(4.0) | $(27.3) | $(9.7) |
| Net loss | $(9.3) | $(3.8) | $(26.7) | $(7.2) |
| Net loss per common share | $(0.47) | $(11.92) | $(8.16) | $(117.94) |
- Operating expenses rose with AKB-6548 clinical studies, drug manufacturing and the thorough-QT study, as well as higher staffing, stock compensation, public-company and commercial-planning costs.
- For the nine months, operating cash use was $18.3 million, versus $6.4 million in 2013. Investing activities used $57.7 million, largely as the company placed IPO proceeds into marketable securities. Financing provided $104.4 million, primarily from the IPO.
- At September 30, cash and cash equivalents were $49.7 million and available-for-sale securities were $68.7 million, for combined liquidity of about $118.3 million. Total assets were $120.2 million; total liabilities were $6.6 million; accumulated deficit was $90.3 million. The filing reports no material off-balance-sheet arrangements and only a small capital-lease obligation.
- Management expected existing resources to fund projected operating requirements through the first half of 2016, while cautioning that spending or development plans could change and additional capital may be needed.
Changes versus comparable periods and unusual items
- Q3 net loss increased to $9.3 million from $3.8 million; nine-month net loss increased to $26.7 million from $7.2 million. Research and development and general and administrative expenses increased substantially as development advanced and the company expanded after its IPO.
- Akebia completed its IPO on March 25, 2014, selling 6.762 million shares at $17 per share and receiving approximately $104.4 million in net proceeds. Outstanding preferred shares converted into 12.1 million common shares.
- Nine-month 2014 net loss attributable to common stockholders included $86.9 million of preferred-stock accretion before the IPO conversion; this made the common-stockholder loss and loss per share much larger than net loss alone. The 2013 comparison also included a $2.4 million gain on extinguishment of debt.
- Stock-based compensation was $5.1 million for the first nine months of 2014, compared with $0.4 million in 2013, including approximately $1.0 million related to an award modification.
Outlook, commentary and risks
- Akebia reported that AKB-6548 had completed a Phase 2b study in non-dialysis CKD patients. After quarter-end, it announced positive top-line results on October 27, 2014; full efficacy and safety data were expected in the first half of 2015. The company planned to initiate Phase 3 studies in 2015 and, if results were favorable, anticipated a U.S. NDA submission by 2018.
- A Phase 2 study of AKB-6548 in dialysis patients was underway, with results expected in Q3 2015. A thorough-QT study completed in Q3 showed no adverse effect on cardiac repolarization or conduction. The filing noted a higher incidence of serious adverse events in the AKB-6548 arm of the Phase 2b study, most commonly renal-related; detailed study results were not provided in this filing.
- AKB-6899 remained preclinical. The company was conducting IND-enabling work with the goal of filing an IND and obtaining FDA clearance in 2015. Akebia planned to commercialize AKB-6548 itself in the United States if approved and seek partners for other markets.
- Key risks include clinical, regulatory and manufacturing uncertainty; dependence on AKB-6548; need for additional financing; competition; future market access and reimbursement; and reliance on contract research and manufacturing organizations. Patent opposition proceedings in Europe and an invalidity proceeding in Japan could affect commercialization in those regions.
- The company had no material change in contractual obligations from those previously disclosed. Management concluded disclosure controls were effective as of September 30, 2014.
Most important facts for investors to verify
- Review the complete Phase 2b efficacy and safety results, particularly the serious-adverse-event imbalance, and confirm that the planned Phase 3 design and timing receive regulatory support.
- Track enrollment, timing and results for the dialysis Phase 2 study, and progress of AKB-6899 toward IND filing.
- Assess cash burn against the stated first-half-2016 runway, including expected Phase 3 costs and potential financing needs.
- Monitor the European and Japanese patent proceedings and the effect of competitors, reimbursement policies and dialysis-provider relationships on commercial prospects.