Akebia Therapeutics, Inc. — Q3 2022 Form 10-Q
Business context and period. Unaudited results cover the quarter and nine months ended September 30, 2022; balance-sheet comparisons are to December 31, 2021. Akebia is a kidney-disease biopharmaceutical company. Its only U.S.-approved product is Auryxia; vadadustat remains investigational in the U.S. and is marketed in Japan by MTPC as Vafseo.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $49.0m | $48.8m | $237.4m | $154.0m |
| Auryxia net product revenue | $42.2m | $36.8m | $127.4m | $100.1m |
| License, collaboration and other revenue | $6.7m | $12.0m | $110.0m | $53.9m |
| Operating loss | $(48.2)m | $(54.9)m | $(72.8)m | $(199.2)m |
| Net loss | $(51.9)m | $(59.5)m | $(85.0)m | $(212.2)m |
| Net loss per share, diluted | $(0.28) | $(0.34) | $(0.47) | $(1.30) |
Q3 total revenue was nearly unchanged year over year: higher Auryxia sales were largely offset by lower collaboration revenue. Q3 cost of goods sold was $37.9m versus $15.9m, including a $13.2m non-cash charge for excess purchase commitments and $2.6m of inventory write-downs. Total-revenue gross margin was approximately 22% versus 67% in Q3 2021, a comparison affected by these costs and by collaboration revenue. Nine-month 2022 revenue included substantial one-time Otsuka termination-related revenue; it is not an indicator of recurring revenue at that level.
Research and development expense fell to $27.4m in Q3 and $97.2m for nine months, while selling, general and administrative expense fell to $30.9m and $108.1m, respectively, mainly reflecting lower headcount and other costs. Nine-month results included $14.7m of restructuring charges.
- Cash and liquidity: Cash and cash equivalents were $144.8m at September 30, 2022, compared with $149.8m at year-end 2021. Current assets were $237.5m and current liabilities $188.0m.
- Cash flow: Net cash used in operating activities was $18.5m for the first nine months, versus $190.2m in 2021. Cash, cash equivalents and restricted cash declined $4.0m to $147.8m. Financing cash included Vifor’s $40.0m working-capital-fund contribution and $7.1m of net stock issuance proceeds, offset in part by $33.0m of debt payments.
- Debt and other obligations: Term loans were reported as $65.9m current at quarter-end; scheduled principal payments were $32.0m in 2023 and $35.0m in 2024. Akebia prepaid $25.0m of principal in July and paid a $0.5m premium. The $40.0m Vifor working-capital contribution is repayable and recorded as a refund liability; $13.7m was classified current. Stockholders’ equity was $13.9m, down from $76.5m at year-end.
Material changes, outlook and risks
- Auryxia revenue increased 15% in Q3 and 27% for the first nine months, primarily from pricing and improved payer mix. Management also cited a shrinking phosphate-binder market, COVID-related effects and dialysis-provider labor constraints as headwinds. Generic Auryxia entry is permitted from March 20, 2025, subject to FDA approval and certain settlement terms.
- The FDA issued a complete response letter for vadadustat on March 29, 2022, citing an unfavorable benefit-risk assessment, including thromboembolic events driven by vascular-access thrombosis and potential drug-induced liver injury. Akebia submitted a Formal Dispute Resolution Request in October and expected an FDA response by year-end 2022. The outcome and any U.S. approval remain uncertain. U.S. and European pediatric trial activities were suspended following a partial FDA hold and EMA recommendation.
- Otsuka’s collaboration agreements terminated June 30, 2022. Akebia received a nonrefundable $55.0m settlement payment and recognized related deferred and non-cash revenue; it expects no future revenue under those agreements. Otsuka transferred certain international marketing applications to Akebia. Management expected an EMA decision in Q1 2023, while noting a cautious outlook for approval in non-dialysis patients.
- Following the vadadustat CRL, Akebia reduced its workforce by approximately 42% (47% including closure of most open positions) and recorded $14.7m of restructuring charges. Management expects lower expenses but continued significant operating losses, and is pursuing further cost reductions and changes to supply arrangements.
- Going concern: Despite management’s estimate that cash could fund its current operating plan for at least 12 months from filing, the company concluded that substantial doubt exists about its ability to continue as a going concern. The plan depends partly on cost reductions and contract changes outside its control; management judged the likelihood of those plans succeeding to be less than probable. A future going-concern qualification in an annual report could trigger a loan default and potential acceleration.
- Other significant risks: Auryxia supply commitments and the excess-purchase-commitment liability remain material; third-party manufacturing is essential. Nasdaq had notified Akebia of a minimum-bid-price deficiency, with a November 8, 2022 deadline then applicable and a possible additional compliance period dependent on eligibility. Disclosure controls were deemed ineffective due to an unremediated material weakness in inventory controls. The filing also describes active stockholder litigation and patent disputes; no significant legal-dispute loss liability was recorded.
Important facts for investors to verify
- Subsequent FDA action and timing on the vadadustat dispute request, and the status and scope of any potential U.S. or European approval.
- Actual cash burn and runway, including whether planned supply-contract changes and cost reductions are achieved; distinguish repayable Vifor funding from permanent liquidity.
- Quarterly Auryxia demand, pricing, payer mix, market trends, inventory write-downs and excess purchase commitments.
- Debt covenant compliance, repayment and acceleration risks, and the company’s ability to resolve the going-concern uncertainty.
- Remediation and testing of inventory controls, Nasdaq listing compliance, and developments in the active stockholder and patent proceedings.