Akebia Therapeutics, Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014. Akebia is a development-stage biopharmaceutical company developing HIF-based therapies, principally AKB-6548 for anemia associated with chronic kidney disease (CKD). It has no approved products and has generated no product revenue.
Financial results and liquidity
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $6.16 million | $1.90 million |
| General and administrative expense | $3.75 million | $0.68 million |
| Total operating expense / operating loss | $9.91 million | $2.58 million |
| Net loss | $9.70 million | $0.62 million |
| Net loss applicable to common stockholders | $96.60 million | $1.47 million |
| Basic and diluted loss per share | $43.37 | $3.09 |
| Net cash used in operating activities | $6.01 million | $1.53 million |
- At March 31, cash and cash equivalents were $126.32 million, investments were $5.83 million, and total current assets were $133.74 million. Total current liabilities were $6.12 million; total liabilities were $6.16 million.
- Cash and investments totaled approximately $132.15 million. The company reported an accumulated development-stage deficit of $73.34 million.
- No product gross margin is applicable because there was no revenue. The filing does not report a meaningful operating margin.
- Debt was limited to capital lease obligations: $11,275 present value at quarter-end. The filing reports no off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Operating expenses increased $7.33 million year over year. R&D growth mainly reflected AKB-6548 Phase 2b trial costs, along with patent, personnel, and stock-based compensation expense. G&A growth reflected stock compensation, IPO-related professional fees, personnel, consulting, and severance costs.
- Stock-based compensation rose to $2.44 million from $56,392. Approximately $1.0 million of Q1 2014 expense related to modification of awards connected with an employee separation.
- Net loss applicable to common stockholders and per-share loss were substantially affected by $86.90 million of preferred-stock accretion recognized when preferred shares converted at the IPO. This was not the quarter’s operating loss.
- Operating cash use increased to $6.01 million from $1.53 million. Financing provided $105.75 million in Q1 2014, largely from the IPO, versus $2.48 million in Q1 2013.
Outlook, commentary, and risks
- Akebia completed its IPO on March 25, 2014, selling 6.762 million shares at $17.00 per share. Gross proceeds were approximately $115.0 million and reported net proceeds were approximately $104.4 million. All outstanding redeemable convertible preferred stock converted into 12.115 million common shares. The company said it had not used IPO proceeds as of March 31.
- Management expected Phase 2b data for AKB-6548 in non-dialysis CKD patients in Q4 2014. Subject to positive results, it expected to begin Phase 3 in 2015 and anticipated an NDA submission by 2018 if Phase 3 results were favorable. An efficacy study in dialysis patients was also planned.
- The company estimated its IPO proceeds and existing cash and investments would fund projected operating requirements through the first half of 2016. This is a forecast, subject to trial costs, development progress, and other assumptions; management anticipated ongoing losses and possible additional financing needs.
- Key risks include dependence on AKB-6548, uncertain clinical efficacy and safety, trial enrollment and regulatory delays, reliance on contract research and manufacturing organizations, future financing needs, competition, and market access/reimbursement. The filing notes gastrointestinal disorders were the most common drug-related adverse events observed to date.
- Intellectual-property exposure includes two European patent opposition proceedings: an appeal involving Akebia’s patent that includes AKB-6548 and Akebia’s opposition to a FibroGen patent that could affect intended use in Europe. Outcomes were uncertain.
- Unusual items include $323,685 of Q1 severance expense and the preferred-stock accretion described above. The company disclosed a three-year Cambridge office lease and approximately $4.03 million of remaining research and development contract costs, with contracts generally modifiable or cancellable on notice.
Important facts for investors to verify
- Whether the Q4 2014 Phase 2b data timing and subsequent Phase 3 and NDA milestones remain achievable, and what the trial results show on efficacy and safety.
- Cash burn and runway against the first-half-2016 estimate, including trial, manufacturing, and public-company costs, and whether additional financing is required.
- The effects of preferred-stock accretion on reported common-stock loss and per-share results; distinguish these figures from net loss and operating cash use.
- Developments in both European patent proceedings and any implications for AKB-6548 commercialization or freedom to operate.
- Common-share count: the filing excerpt gives 20,262,693 shares at March 31, 2014, while the cover page reports 20,262,293 at April 30, 2014. Confirm the applicable reported share count and any subsequent changes.