Akebia Therapeutics, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing also reports fourth-quarter 2015 results. Akebia is a clinical-stage biopharmaceutical company developing HIF-pathway medicines; it had no approved products and generated no product revenue.
Financial performance and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Product revenue | $0 | $0 |
| Research and development expense | $43.0 million | $23.3 million |
| General and administrative expense | $18.5 million | $14.7 million |
| Total operating expenses / operating loss | $61.5 million / $(61.5) million | $37.9 million / $(37.9) million |
| Net loss | $(60.7) million | $(37.0) million |
| Net loss per share, basic and diluted | $(2.29) | $(8.04) |
| Cash, cash equivalents and available-for-sale securities, year-end | $138.5 million | $108.9 million |
| Working capital, year-end | $129.1 million | $103.6 million |
- Net cash used in operating activities was $52.4 million, up from $27.5 million in 2014. Financing activities provided $83.1 million, primarily from common-stock offerings and the at-the-market program.
- No conventional debt balance is highlighted; capital-lease obligations were approximately $14,000. Disclosed future operating-lease payments totaled $32.7 million.
- Fourth-quarter 2015 operating expenses were $20.1 million and net loss was $19.9 million, compared with $10.6 million and $10.4 million, respectively, in fourth-quarter 2014.
- Margins are not meaningful because the company had no product revenue.
Material changes and business developments
- R&D expense rose $19.8 million year over year, driven chiefly by preparation for vadadustat Phase 3, increased headcount and consulting, and AKB-6899 development. G&A expense increased $3.8 million, including commercial planning, personnel, legal and facilities costs.
- Akebia began dosing patients in the non-dialysis Phase 3 PRO2TECT program in December 2015. It expected to start the dialysis-dependent INNO2VATE program in 2016. Management anticipated potential U.S. NDA and European MAA submissions in 2019 if Phase 3 results were favorable.
- The Phase 3 programs were planned for approximately 3,100 non-dialysis and 2,600 dialysis patients, at an estimated $80,000–$85,000 per patient. The filing estimates total program costs of $456.0–$484.5 million.
- Phase 2 results were described as showing hemoglobin response in non-dialysis patients and maintenance of hemoglobin in dialysis patients switched from injectable ESA therapy. These are company-reported trial findings, not evidence of regulatory approval or established comparative safety.
- Akebia entered a December 2015 collaboration with Mitsubishi Tanabe for Japan and certain Asian markets, with potential milestone payments up to $350 million and tiered double-digit royalties. The $40 million upfront payment was received in January 2016; $20 million was potentially refundable depending on discussions with the Japanese regulator.
- After year-end, Akebia raised approximately $61 million net in a January 2016 follow-on offering. Together with the collaboration receipt, management said available resources were expected to fund operations through at least the second quarter of 2017, but not complete both Phase 3 programs.
Outlook, risks and unusual items
- Management expected significant ongoing losses and rising expenses for the foreseeable future; profitability depends on successful clinical development, regulatory approval, commercialization and market access.
- The company intended to seek another geographic collaboration to help fund Phase 3. There was no assurance it could secure one or raise additional capital on acceptable terms; failure could require delays, reductions or termination of development programs.
- At year-end, approximately $246 million of committed Quintiles work remained unpaid, with work expected through the third quarter of 2019. The agreement could be modified or cancelled by Akebia on notice.
- Key risks include Phase 3 efficacy and cardiovascular-safety outcomes, enrollment and regulatory requirements, reliance on contract manufacturers and CROs, reimbursement and competition, and patent disputes. Vadadustat Phase 2 studies included reported deaths and serious adverse events; Akebia attributed some differences in renal-event reporting to investigator variation.
- A securities class action filed in 2015 alleges misstatements or omissions concerning the vadadustat Phase 2b study. The company denied the claims; the possible loss was not estimable and no amount was accrued.
- In the fourth quarter, Akebia corrected a prior-period classification error between R&D and G&A. Management said it was not material and did not affect total expenses or net loss.
- Management reported effective internal control over financial reporting and disclosure controls as of December 31, 2015. The auditor issued an unqualified opinion on the financial statements, but was not engaged to opine on internal-control effectiveness.
Important facts for investors to verify
- Whether PRO2TECT and INNO2VATE enrollment, timing, cost per patient and total budget remain on plan, and whether available financing covers the development schedule.
- The terms and conditions of the Mitsubishi collaboration, including the potentially refundable $20 million and the timing and conditions for additional milestones.
- Phase 3 efficacy and major adverse cardiovascular event results, and how they compare with the Phase 2 findings and competing therapies.
- Updates on the securities litigation and the company’s European patent opposition proceedings, including any appeal or effect on commercialization rights.
- Quarterly cash burn, capital raised and dilution, lease commitments, and the assumptions underlying the stated runway through at least Q2 2017.