Akebia Therapeutics, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing was dated February 25, 2021. Akebia is a kidney-disease-focused biopharmaceutical company, with U.S. commercial sales of Auryxia and vadadustat in late-stage development for anemia due to chronic kidney disease (CKD).
Financial performance and position
| Metric | FY 2020 | FY 2019 | Change |
|---|---|---|---|
| Total revenue | $295.3 million | $335.0 million | Down $39.7 million |
| Auryxia product revenue, net | $128.9 million | $111.1 million | Up $17.8 million |
| License, collaboration and other revenue | $166.4 million | $223.9 million | Down $57.5 million |
| Net loss | $383.5 million | $279.7 million | Loss increased $103.8 million |
| Net loss per share | $2.77 | $2.36 | Greater loss per share |
| Cash, cash equivalents and available-for-sale securities | $268.7 million | $147.7 million | Up $121.0 million |
| Working capital | $184.3 million | $101.4 million | Up $82.9 million |
| Operating cash flow | $(110.4) million | $(257.4) million | Cash use decreased |
Profitability and margins: Operating loss was $376.4 million, versus $286.3 million in 2019. Cost of goods sold totaled $295.9 million, exceeding total revenue; this included a $115.5 million Auryxia intangible-asset impairment, $31.5 million of intangible amortization, and substantial product costs and non-cash charges. The filing does not present a conventional positive gross margin for the year.
Cash flow and financing: Investing activities used $40.0 million; financing activities provided $231.7 million, including $209.4 million net proceeds from common-stock issuance and approximately $20.0 million net proceeds from the second Pharmakon loan tranche. Cash, cash equivalents and restricted cash at year-end were $231.1 million; the broader cash-and-securities balance was $268.7 million. Management stated that resources were expected to fund its current operating plan for at least the next 12 months from filing, while also warning that substantial additional funding would be needed thereafter and that actual runway could be shorter than projected.
Debt and liquidity: Pharmakon term loans had $100.0 million principal outstanding, with a $96.4 million net carrying value at year-end. The loans bear floating interest at three-month LIBOR plus 7.50%, subject to stated floors and caps, are secured by specified assets including Auryxia-related assets, and include minimum-liquidity and Auryxia-sales covenants. No default was reported at December 31, 2020. Total contractual obligations were $380.2 million, including manufacturing commitments of $215.6 million, lease obligations of $35.6 million and debt obligations of $129.0 million.
Fourth-quarter context: Q4 2020 revenue was $56.7 million, including $34.6 million of product revenue and $22.1 million of license, collaboration and other revenue, versus total Q4 2019 revenue of $69.6 million. Q4 net loss was $87.0 million, compared with $94.5 million a year earlier. Q4 2020 cost of goods sold was $63.2 million.
Material changes versus the prior year
- Auryxia sales grew 16% year over year, primarily on higher units sold, but collaboration revenue fell 26%, mainly because lower vadadustat development costs reduced Otsuka cost-share revenue as Phase 3 studies concluded.
- Research and development expense declined $104.5 million to $218.5 million; selling, general and administrative expense increased $4.5 million to $153.9 million.
- Cost of goods sold increased $150.6 million, including the $115.5 million Auryxia impairment and higher product-related charges. The impairment followed a reduced Auryxia forecast, principally associated with Medicare coverage restrictions.
- Operating cash use declined to $110.4 million from $257.4 million, while financing activity and equity issuance increased year-end liquidity. Shares outstanding rose to 148.1 million from 121.7 million at year-end 2019.
- Vadadustat received Japanese approval and launched there as Vafseo in August 2020. Its U.S. and European prospects remain uncertain because the NDD-CKD Phase 3 program missed its primary cardiovascular-safety endpoint.
Outlook, commentary and significant risks
- Akebia planned to submit a U.S. NDA for vadadustat by mid-Q2 2021 and, with Otsuka, an EMA application in 2021. Management explicitly remained cautious about approval for non-dialysis patients after PRO2TECT did not meet its primary MACE non-inferiority endpoint (HR 1.17; 95% CI 1.01–1.36). In dialysis patients, INNO2VATE met its primary MACE endpoint (HR 0.96; 95% CI 0.83–1.11). Both programs met hemoglobin efficacy endpoints.
- Management attributed the excess MACE events in PRO2TECT primarily to non-cardiovascular and unknown-cause deaths outside the U.S.; a U.S. subgroup analysis showed HR 1.06 (95% CI 0.87–1.29). These company analyses do not eliminate the regulatory and safety uncertainty.
- Auryxia Medicare Part D coverage for the IDA indication remains rescinded, and prior authorization remains required for its hyperphosphatemia indication. Akebia’s challenge to the CMS decision remained pending after courts denied preliminary relief. The company said COVID-19-related hospitalization and mortality among CKD patients hurt Q4 growth and could continue to weigh on sales.
- Akebia recorded $115.5 million of Auryxia intangible impairment, $20.1 million of inventory write-downs, and a $25.1 million cost-of-goods-sold increase associated with excess purchase commitments. The Auryxia intangible’s estimated remaining useful life was reduced to six years. The company also disclosed three limited voluntary Auryxia recalls.
- Generic Auryxia litigation continues against certain ANDA filers. Settlements with Par, Teva/Watson and Lupin provide for licensed generic entry from March 20, 2025, subject to FDA approval and earlier-entry provisions. Other generic challenges remained in litigation.
- On February 25, 2021, after year-end, Akebia received $45.0 million net from monetizing vadadustat royalties and sales milestones payable under its MTPC agreement, subject to a $13.0 million annual cap and $150.0 million aggregate cap. It may receive another $15.0 million if specified sales milestones are met; the transaction also imposes covenants and default provisions.
- The independent auditor gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. A material weakness in inventory controls remained unremediated at year-end, covering reconciliation review, inventory-cost validation, and excess/obsolete inventory reserves. Management said it was pursuing remediation during 2021.
Most important facts for investors to verify
- FDA and EMA review outcomes, timing, labeling and safety conclusions for vadadustat, particularly the NDD-CKD cardiovascular signal and the distinction between U.S. and non-U.S. results.
- Auryxia prescription trends, payer mix, Medicare prior-authorization effects, COVID-19 impact, and whether sales meet Pharmakon covenant thresholds.
- Cash burn, financing needs, and whether collaboration funding, regulatory milestones or other capital sources arrive as anticipated; assess the royalty monetization’s impact on future MTPC receipts.
- Inventory-control remediation and the potential for further inventory write-downs, manufacturing-quality issues, or additional Auryxia impairment and excess-purchase-commitment charges.
- Generic litigation and settlement terms, including possible earlier entry, and the outcome of the CMS coverage litigation.