Akebia Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Akebia is a kidney-disease biopharmaceutical company whose only U.S.-approved product is Auryxia; vadadustat remains investigational in the United States.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $126.8 million | $52.9 million | $188.5 million | $105.2 million |
| Net product revenue | $43.7 million | $33.0 million | $85.2 million | $63.4 million |
| License, collaboration and other revenue | $83.1 million | $20.0 million | $103.3 million | $41.9 million |
| Operating income (loss) | $33.9 million | ($79.3 million) | ($24.6 million) | ($144.3 million) |
| Net income (loss) | $29.3 million | ($83.0 million) | ($33.1 million) | ($152.6 million) |
| Operating cash flow | Not separately stated for Q2 | ($52.3 million) | ($133.9 million) |
Q2 net income included $81.1 million of Otsuka collaboration revenue associated with termination and settlement of the parties’ agreements. This included $55.0 million payable under the settlement, $15.5 million of previously deferred revenue, and $9.6 million of non-cash consideration for agreed clinical activities. The $55.0 million payment was received in July. Akebia said Auryxia revenue growth reflected pricing and improved payer mix.
For the six months, total cost of goods sold was $49.9 million, including $18.0 million of intangible amortization. Operating expenses were $163.1 million, including $14.5 million of restructuring charges. Q2 cost of goods sold fell substantially versus 2021, when it included a $30.3 million charge for excess purchase commitments; the first half of 2021 also included inventory step-up charges.
Balance sheet, liquidity and debt
- At June 30, 2022, cash and cash equivalents were $143.9 million, total current assets $304.2 million, and total current liabilities $233.7 million. Total assets were $521.8 million and stockholders’ equity $62.3 million.
- Cash, cash equivalents and restricted cash totaled $147.0 million at June 30; this differs from the $143.9 million cash-and-equivalents balance on the balance sheet.
- Term-loan carrying value was $98.2 million at quarter-end and classified as current. On July 15, Akebia prepaid $25.0 million of principal and paid a $0.5 million premium plus accrued interest; Pharmakon also waived or modified certain covenants. The loans are secured by specified assets, including Auryxia-related assets and cash.
- Vifor provided $40.0 million for a vadadustat working-capital fund, recorded as a refund liability that Akebia must repay over time. The company reported $40.3 million of total refund liability, net of discount and deferred gain, including $14.2 million classified current.
- Six-month financing cash flow was $47.5 million, primarily the $40.0 million Vifor contribution and $7.1 million of net equity proceeds. Cash declined by $4.9 million over the period.
Material developments, outlook and risks
- Vadadustat regulatory status: The FDA issued a complete response letter on March 29, 2022, concluding it could not approve the NDA in its present form. Akebia was evaluating next steps, with discussions focused on possible U.S. approval for dialysis-dependent patients. FDA safety concerns included failure to meet the MACE non-inferiority endpoint in non-dialysis patients, thromboembolic events in dialysis patients, and potential drug-induced liver injury. A partial U.S. pediatric clinical hold and an EMA recommendation not to initiate pediatric trials also suspended related U.S. and European activity.
- Otsuka termination: The U.S. and international collaboration agreements ended June 30, 2022. Akebia will not recognize future revenue under those agreements and is responsible for pursuing a new partner for territories previously licensed to Otsuka. Otsuka agreed to help transfer the European marketing application; transfer and other regulatory outcomes remained uncertain.
- Cost reduction: Following the CRL, Akebia reduced its workforce by approximately 42% (47% including closure of most open positions), with a further management reduction initiated in May. Expected restructuring charges were approximately $14.8 million. Management expected SG&A to continue declining from 2021 levels and R&D to decrease in the near term, but anticipated significant expenses and operating losses to continue.
- Going concern: Management concluded that substantial doubt exists about the company’s ability to continue as a going concern for at least twelve months after issuance of the financial statements. Although it stated cash was expected to fund the current operating plan through at least the next twelve months from filing, that plan depended on cost savings and contractual changes outside the company’s control; management assessed the likelihood of those plans succeeding as less than probable.
- Other risks and contingencies: Auryxia is highly important to the business; generic entry is permitted under settlements beginning March 20, 2025, subject to FDA approval and earlier-entry provisions. The company disclosed a material weakness in inventory controls and ineffective disclosure controls as of June 30. Nasdaq had notified Akebia that its share price was below the $1 minimum bid requirement, with an initial compliance deadline of November 8, 2022. Stockholder litigation remained pending; the company said it could not estimate a possible loss range. Management also cited COVID-19 impacts on CKD patients, sales access and supply, as well as manufacturing commitments and inventory write-down risk.
- No numeric revenue, earnings or cash-flow guidance was provided. Akebia said it expected to finance future cash needs through product revenue, strategic transactions or other funding; it warned additional capital may be needed and may not be available on acceptable terms.
Investor verification priorities
- Separate recurring Auryxia economics and cash generation from the one-time Otsuka termination-related revenue recognized in Q2.
- Track vadadustat’s regulatory path, safety issues, potential additional trial requirements and transfer of the European application.
- Verify cash runway against actual cost reductions, supply-contract amendments, operating cash burn and the $25.0 million July debt prepayment.
- Monitor Pharmakon covenant compliance, repayment requirements and the potential consequences of any default or acceleration.
- Assess progress remediating the inventory-control material weakness, Auryxia inventory and purchase commitments, and the Nasdaq bid-price compliance status.
- Follow Auryxia sales, payer mix, generic-entry timing, pending litigation and any potential effects on liquidity or operations.