Akebia Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The report was filed August 28, 2023, after the company missed the normal filing deadline. Akebia is a kidney-disease-focused biopharmaceutical company. Its U.S. commercial product is Auryxia; vadadustat is marketed as Vafseo in certain countries and remains subject to U.S. regulatory review.
Financial performance
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Total revenue | $56.4 million, down 55% year over year | $96.4 million, down 49% |
| Product revenue, net | $42.2 million, down 2% | $77.0 million, down 9% |
| License, collaboration and other revenue | $14.1 million, down 83% | $19.4 million, down 81% |
| Operating income (loss) | $(9.0) million | $(34.6) million |
| Net income (loss) | $(11.2) million; $(0.06) per share | $(38.1) million; $(0.20) per share |
| Research and development expense | $20.2 million | $39.9 million |
| Selling, general and administrative expense | $27.0 million | $52.1 million |
Cash and cash equivalents were $53.6 million at June 30, 2023, versus $90.5 million at December 31, 2022. Current assets were $118.4 million and current liabilities $92.2 million. Stockholders’ deficit was $26.8 million. Six-month operating cash use was $13.9 million; investing cash flow was zero and financing cash use was $24.0 million, primarily debt repayment. Cash, cash equivalents and restricted cash declined $37.9 million to $55.3 million.
Debt principal was approximately $43.0 million at quarter-end ($42.5 million net of issuance costs on the balance sheet); the term loan matures November 25, 2024. Its stated interest rate at June 30 was 10.85%, and the loan agreement was amended to replace LIBOR with SOFR. The company paid $24.0 million of principal in the first half.
Changes and notable items
- Auryxia sales fell year over year, attributed mainly to lower volume and a less favorable payer mix, contracting dynamics, and a declining phosphate-binder market; a January 2023 price increase partly offset the decline.
- The sharp decline in collaboration revenue chiefly reflects the termination of Otsuka agreements in June 2022. Q2 2022 included a $55.0 million termination payment, $15.5 million of previously deferred revenue and $9.6 million of non-cash consideration. Q2 2023 included a $10.0 million Medice upfront license payment and $2.2 million under an Otsuka packaging-transfer agreement.
- Operating expenses declined year over year, including lower R&D and SG&A after 2022 workforce reductions and reduced development, marketing and professional-service spending. Q2 2022 included $14.5 million of restructuring expense. Q2 2023 included a $0.5 million loss on assignment of the Boston office lease.
- Six-month 2023 net loss increased from the revised $34.1 million prior-year loss to $38.1 million, despite lower expenses, primarily in a period with substantially less collaboration revenue.
Outlook, risks and contingencies
- Management said available cash was expected to fund the current operating plan for at least 12 months from the filing date. It also said additional capital would be needed for strategic growth beyond Auryxia and later-stage development or commercialization. Funding availability, timing and terms are uncertain; failure to execute the plan or obtain financing could impair liquidity and operations.
- Akebia expected to resubmit the U.S. vadadustat NDA for dialysis-dependent CKD patients by the end of Q3 2023, with a projected PDUFA date in March 2024. The FDA had issued a CRL in 2022, citing benefit-risk concerns including MACE results in non-dialysis patients, thromboembolic events in dialysis patients and potential drug-induced liver injury. The FDA’s May 2023 dispute decision offered a dialysis-only resubmission path without additional clinical data; approval remains uncertain.
- Vafseo received European Commission, UK and Swiss authorization in 2023 for dialysis-dependent adults. Under the May 2023 Medice agreement, Akebia recognized a $10.0 million upfront payment and may receive up to $100 million in commercial milestones plus tiered royalties. Management disclosed that Medice expected launches in certain countries to be later than previously anticipated.
- Auryxia U.S. patent settlements permit Zydus and other settling generic applicants to launch from March 20, 2025, subject to FDA approval, or earlier in specified circumstances. Akebia identifies loss of Auryxia exclusivity and the declining phosphate-binder market as risks to its principal product revenue.
- Management identified a material weakness in controls over Auryxia product-return reserves; disclosure controls were not effective at June 30. The company revised prior-period statements for errors that it deemed immaterial to those periods, but said correction in the current quarter would have materially misstated current-period results. The errors included understated reserves and, in some periods, overstated revenue. Remediation is underway but not complete.
- The company reported compliance with Pharmakon loan covenants at June 30 and no event of default. The loan is secured by specified assets, includes liquidity and Auryxia sales covenants, and may be accelerated following specified defaults. Akebia also disclosed Nasdaq notice relating to late filing; the stock continued trading while the company pursued compliance.
- Other exposures include a pending stockholder lawsuit related to the Keryx merger, patent proceedings, dependence on third-party manufacturers (including single-source suppliers), and contractual purchase commitments. The company could not reasonably estimate a loss range for the stockholder action and did not expect routine legal matters to materially affect its financial position, results or cash flows.
Investor verification checklist
- Track actual Auryxia sales, payer mix, returns and reserve estimates, and whether the product-return control weakness is remediated and tested effectively.
- Verify the timing, contents and FDA acceptance of the vadadustat NDA resubmission, the resulting review date, and any approval or labeling conditions.
- Assess cash burn and financing needs against management’s stated runway, and monitor debt service, covenants and the November 2024 maturity.
- Confirm Medice launch timing and any resulting royalties or milestones; distinguish recurring revenue from one-time or non-cash collaboration items.
- Evaluate the impact and timing of generic Auryxia entry, along with product demand, supply commitments and manufacturing risks.
- Follow Nasdaq filing compliance and developments in the stockholder and patent proceedings.