Akebia Therapeutics, Inc. — Q1 2023 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2023, compared with Q1 2022. Akebia is a kidney-disease therapeutics company whose principal U.S. commercial product is Auryxia. Vadadustat is marketed by partners in Japan and, following an April 2023 European Commission approval, authorized in Europe for dialysis-dependent adults; U.S. approval remains unresolved.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Total revenue | $40.1 million | $61.7 million |
| U.S. product revenue, net | $34.8 million | $41.4 million |
| License, collaboration and other revenue | $5.3 million | $20.3 million |
| Gross profit / margin, derived from reported revenue less cost of goods sold | $20.6 million / 51.4% | $30.4 million / 49.2% |
| Operating loss | $24.9 million | $58.5 million |
| Net loss / loss per share | $26.2 million / $0.14 | $62.4 million / $0.35 |
| Net cash used in operating activities | $17.5 million | $21.6 million |
| Cash and cash equivalents at period end | $57.0 million | $90.5 million at Dec. 31, 2022 |
At March 31, 2023, current assets were $120.7 million and current liabilities were $82.9 million, implying working capital of approximately $37.8 million. Total liabilities were $291.2 million versus total assets of $276.9 million, leaving a $14.4 million stockholders’ deficit. Debt had a $51.0 million principal balance; the balance sheet reported $24.0 million current and $26.3 million long-term, net of discounts. The company made $16.0 million of debt principal payments during the quarter. Cash, cash equivalents and restricted cash together were $59.7 million at quarter end.
Changes versus Q1 2022
- Revenue fell $21.6 million, chiefly because Otsuka collaboration revenue ended after the June 2022 termination of its agreements. Akebia reported no Q1 2023 Otsuka revenue, compared with $11.1 million in Q1 2022. Revenue from vadadustat supply to MTPC also declined following transfer of the Esteve supply agreement to MTPC.
- Auryxia product revenue declined $6.6 million, which management attributed primarily to customer inventory reductions and lower volume, partly offset by higher net price per tablet.
- Operating expenses declined $43.3 million: R&D fell $24.1 million and SG&A fell $19.1 million. Management cited 2022 workforce reductions, lower clinical and outsourced development activity, and reduced vadadustat marketing expense.
- Product cost of goods sold declined, in part because inventory write-downs were $0.3 million versus $5.3 million in Q1 2022. Intangible amortization remained $9.0 million in both periods.
- Operating cash use improved by $4.1 million, but cash declined $33.5 million overall, principally reflecting operating cash use and $16.0 million of debt payments. Q1 2022 financing cash inflows included a $40.0 million customer refund-liability contribution and $7.2 million of stock issuance proceeds.
Outlook, risks and notable items
- Management stated that available cash was expected to fund the current operating plan for at least twelve months from the May 8, 2023 filing date. The company also said it would need additional funding for strategic growth beyond Auryxia and later-stage development or commercialization. The forecast depends on assumptions; additional financing may be unavailable or dilutive, and deterioration in operating performance could harm liquidity.
- The FDA issued a complete response letter for vadadustat in March 2022, citing benefit-risk concerns, including MACE results in non-dialysis patients, thromboembolic events driven by vascular-access thrombosis in dialysis patients, and potential drug-induced liver injury. Akebia appealed the dialysis-patient decision through a Formal Dispute Resolution Request; after FDA discussions in March 2023, the company expected a response within 30 days of the filing. Approval, timing and any required additional studies remain uncertain.
- The European Commission approved Vafseo in April 2023 for symptomatic CKD-associated anemia in adults on chronic maintenance dialysis. Akebia lacks a European commercial presence and is seeking a commercialization partner.
- Auryxia is central to the business. Akebia stated that U.S. patent protection currently protects it from generic competition until March 2025, subject to litigation and regulatory developments. Zydus filed an ANDA and Akebia and Panion sued in March 2023. Previously settled ANDA cases permit generic entry beginning March 2025, subject to FDA approval. Auryxia revenue is also exposed to a declining phosphate-binder market, reimbursement restrictions and concentrated distribution through four major wholesalers.
- Debt covenants include minimum liquidity and Auryxia sales requirements, and annual reports must not include a going-concern qualification. A covenant default could accelerate secured debt. The company reported no events of default as of March 31, 2023. It also has a $40.8 million long-term refund liability to CSL Vifor and a $57.1 million liability related to monetized future royalties.
- Commercial supply and manufacturing are outsourced, with single-source dependencies identified for key products. A BioVectra termination agreement requires $32.5 million in total payments; $17.5 million was paid in 2022, with six quarterly payments of $2.5 million scheduled to begin in April 2024. Akebia also reported approximately $23.9 million of minimum Auryxia drug-substance purchases through 2024 under its Siegfried agreement.
- Akebia disclosed an active stockholder lawsuit relating to the 2018 merger; it said it could not reasonably estimate potential losses. It also described patent opposition and invalidation proceedings. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
- Nasdaq had granted an additional bid-price compliance period through May 8, 2023. After quarter end, stockholders rejected the proposed reverse split on May 4; the filing said the company did not expect to regain compliance by the deadline and planned to appeal a delisting determination if issued.
Investor verification priorities
- Track Auryxia prescriptions, net pricing, customer inventory levels, reimbursement and the impact of generic-entry litigation and the March 2025 expected loss of exclusivity.
- Verify the FDA’s response to the vadadustat appeal, any further evidence or trial requirements, and the commercial-partner and launch plans following European approval.
- Compare cash burn and cash runway with management’s plan; monitor financing availability, debt covenants, scheduled debt service and the CSL Vifor refund obligation.
- Assess whether cost reductions can be sustained without impairing Auryxia commercialization, development programs or supply reliability.
- Monitor the Nasdaq listing outcome, the Zydus ANDA case, the stockholder lawsuit and material changes in manufacturing commitments or liabilities.