Akebia Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts below are in U.S. dollars; financial statement figures are converted from thousands to millions where appropriate.
Business context
Akebia is a commercial-stage biopharmaceutical company focused on kidney disease. Its marketed U.S. product was Auryxia (ferric citrate). On March 27, 2024, the FDA approved Vafseo (vadadustat) for anemia due to CKD in adults who have been on dialysis for at least three months. Akebia expects U.S. commercial entry in January 2025, working with CSL Vifor for specified dialysis organizations and selling directly to other customers.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $32.6 million | $40.0 million | Down 18% |
| U.S. product revenue, primarily Auryxia | $31.0 million | $34.7 million | Down 11% |
| License, collaboration and other revenue | $1.6 million | $5.3 million | Down 70% |
| Cost of goods sold | $11.6 million | $20.2 million | Down 43% |
| Research and development | $9.7 million | $19.7 million | Down 51% |
| Selling, general and administrative | $25.4 million | $25.1 million | Up $0.4 million |
| Operating loss | $14.9 million | $25.6 million | Loss narrowed |
| Net loss | $18.0 million | $26.9 million | Loss narrowed |
| Basic and diluted loss per share | $0.09 | $0.15 | — |
| Net cash used in operating activities | $19.4 million | $17.5 million | Use increased |
Gross margin, calculated as revenue less reported cost of goods sold divided by revenue, was approximately 64% versus 50%. The improvement included $3.7 million of lower product costs from selling inventory previously written down to zero. R&D declined mainly because certain clinical and regulatory activities were completed or reduced; management said it expects significant R&D spending to continue.
At March 31, 2024, cash and cash equivalents were $42.0 million, versus $42.9 million at year-end; restricted cash was an additional $1.7 million. Current assets were $112.9 million and current liabilities $66.5 million (current ratio approximately 1.7). Total assets were $225.5 million, total liabilities $252.7 million, and stockholders’ deficit $27.3 million. Long-term debt, net of discount and issuance costs, was $30.1 million at quarter-end. The company also reported a $39.9 million CSL Vifor refund liability and a $55.5 million liability related to the sale of future royalties.
Operating cash outflow exceeded the net loss, with working-capital changes contributing to cash use. Financing activities provided $18.5 million, principally from $37.0 million of BlackRock loan proceeds and $18.7 million net ATM equity proceeds, offset mainly by $36.7 million of debt repayments. The ATM issuance added 13.3 million shares during the quarter; shares outstanding were 209.5 million at March 31.
Material changes and unusual items
- Auryxia revenue fell mainly because of lower sales volume, partly offset by price increases and contracting strategy. License and other revenue fell chiefly because MTPC supply-agreement revenue declined following assignment of a supply agreement in 2022.
- Reported product costs benefited from the sale of previously written-down inventory. Auryxia intangible amortization remained $9.0 million and is expected to continue through the end of 2024.
- Akebia replaced its Pharmakon term loans with the secured BlackRock facility in January. It drew $37.0 million gross under Tranche A, repaid approximately $35.0 million of Pharmakon principal, and recorded a $0.5 million debt-extinguishment loss. The facility bears floating interest; the rate was 12.08% at March 31. Interest-only payments are scheduled through December 2026, with maturity extended to January 2028 after Vafseo approval.
- In April, Akebia drew the $8.0 million gross Tranche B (approximately $7.5 million net). A further $10.0 million Tranche C is available through December 2024 subject to conditions, including specified equity or equity-linked proceeds. The agreement is secured by substantially all company assets and requires either at least $15.0 million of cash in controlled accounts or $150.0 million of trailing-twelve-month revenue, measured monthly.
- In May, Akebia and CSL Vifor amended repayment terms for the $40.0 million working-capital fund: repayment is to come through tiered royalties on Vafseo sales beginning July 1, 2025, with a $40.0 million cumulative target and a potential shortfall payment by May 2028. Certain termination circumstances can accelerate or end payments.
Outlook, risks and contingencies
Management states in the MD&A that existing cash, expected operating receipts and available or potential borrowings are expected to fund the current operating plan for at least 24 months. However, the financial-statement note describes resources as sufficient for at least 12 months from filing. These estimates are conditional on operating performance, forecast revenue and access to financing; Akebia warns that it may need additional capital and that acceptable financing may not be available.
Key commercial risks include Vafseo’s limited U.S. dialysis indication, its boxed warning concerning increased risks including death, myocardial infarction, stroke, venous thromboembolism and vascular-access thrombosis, and the need for CMS reimbursement decisions and dialysis-organization adoption. Akebia expects to apply for TDAPA reimbursement and anticipates a January 2025 start, but approval and timing are uncertain. Auryxia faces U.S. loss of exclusivity in March 2025, expected ESRD bundle changes from January 2025 absent further action, and potential generic competition.
Other significant risks include reliance on a small number of third-party manufacturers and distributors, including Chinese suppliers for Vafseo; Auryxia minimum supply commitments of approximately $22.0 million annually through 2026; and Vafseo drug-substance commitments of $13.4 million through 2024. Six BioVectra termination payments of $2.5 million each began in April 2024. Akebia reports a material weakness in inventory accounting controls; disclosure controls were not effective as of March 31, 2024, and remediation is ongoing. Management does not expect resolution of current legal proceedings to have a material adverse effect on its financial position, results or cash flows.
No quantitative full-year revenue, earnings or cash-flow guidance is provided in the supplied filing text. Management expects Vafseo’s U.S. market entry in January 2025 and is evaluating alternative dosing and potential expansion to non-dialysis patients; further studies or regulatory approval may be required.
Important facts for investors to verify
- Reconcile the stated 12-month and 24-month liquidity estimates, including the assumptions for Vafseo launch revenue, Auryxia sales and additional borrowing.
- Track Vafseo CMS TDAPA eligibility and timing, dialysis-provider contracts and formulary adoption, launch readiness, and safety and post-marketing obligations.
- Assess Auryxia sales, pricing and generic-entry effects around the March 2025 loss of exclusivity and January 2025 ESRD bundle transition.
- Monitor cash burn, compliance with BlackRock covenants, Tranche C availability and the economic impact of Vifor royalty repayment terms.
- Confirm progress in remediating the inventory-control material weakness and whether further accounting adjustments or inventory write-downs arise.
- Review manufacturing supply continuity, inventory levels and commitments, particularly for Auryxia and Vafseo and suppliers located in China.